Analysts Warn of Possible 20% Decline in Bitcoin Amid U.S. Rate Cuts and Recession Concerns
Analysts have exercised caution regarding a potential decline in Bitcoin’s value, which may decrease by as much as 20%, should the U.S. Federal Reserve implement a long-anticipated interest rate cut. According to a September 2nd analysis published by Bitfinex, the anticipated reduction in interest rates could present significant challenges for Bitcoin traders.
While a modest cut of 25 basis points is considered generally favorable, contributing to increased liquidity and possibly supporting long-term price appreciation for Bitcoin as recession fears diminish, the report cautions that a more pronounced cut of 50 basis points might incite a corrective shift, further deepening Bitcoin’s existing slump due to escalating recessionary concerns. The analysts conveyed, “If we were to speculate, we would caution to expect a 15-20 percent decline when rates are cut this month, with a bottom of $40-50k for BTC.”
Concerns surrounding an impending recession have escalated since early August, highlighted by a rise in the Sahm Rule Recession Indicator—from 0.43 to 0.53—following disappointing U.S. employment figures, thus indicating a potential economic downturn. As the Federal Open Market Committee (FOMC) meeting on September 18th approaches, data from the decentralized betting platform Polymarket reveals that 69% of traders anticipate a 25 basis point cut, with 27% expecting a more substantial 50 basis point reduction. Notably, only 3% believe that interest rates will remain unchanged.
The recent decline in inflation coupled with a weakening job market has intensified expectations for the Federal Reserve’s economic intervention. This aligns with the Fed’s dual mandate of controlling inflation and fostering economic growth. Although a consensus exists among analysts regarding a likely 25 basis point reduction, views regarding a more aggressive cut remain contingent upon the health of economic indicators. At the recent Jackson Hole symposium, Fed Chair Jerome Powell indicated that “the time has come for” the Federal Reserve to consider lowering interest rates. As Investec economist Lottie Gosling noted, if economic data continues to reflect weakness, a 50 basis point cut may become increasingly plausible.
Bitfinex’s analysts reinforced their assertion by emphasizing that September has historically been a period of heightened volatility for Bitcoin. The upcoming Fed rate adjustment adds another layer of complexity that could exacerbate market fluctuations.
In a scenario where Bitcoin experiences a 20% decline, the price could potentially fall to $46,000—levels not witnessed since February 8th. This perspective aligns with previous analysis from 10x Research, which identified the low 40,000s as an advantageous entry point for a subsequent bull market. However, there remains divergence in the severity of the predicted correction, with notable crypto analyst Moustache suggesting that the market may find a bottom around $57,000. This assessment is supported by historical fractal patterns that have been utilized to identify key support and resistance levels as well as potential trends reversals. Currently, Bitcoin enjoys substantial support at the $57,000 level; however, a drop below this point could trigger the liquidation of over $860 million worth of leveraged short positions according to CoinGlass data.
In conclusion, despite the potentially bleak outlook for Bitcoin in the short term, historical and technical patterns indicate that the possibility of a six-figure Bitcoin remains viable. Trader Titan of Crypto has also noted that the final quarter of the year holds substantial promise for price movement, a sentiment that reflects anticipation among analysts and market participants alike.
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