How the Fed’s New Monetary Policy Could Impact Bitcoin Prices
With the United States Federal Reserve (Fed) set to introduce a new monetary policy in September, experts at Bitfinex are cautioning that this decision could have negative consequences on the price of bitcoin.
Potential Impacts of a Fed Rate Cut
The analysts highlighted that while bitcoin is often seen as a hedge against traditional financial assets, it is still affected by macroeconomic factors.
- Bitcoin surged by over 32% since early August due to expectations of dovish Fed comments.
- Spot traders have been selling, while futures traders are buying.
- A modest 25 basis point cut could lead to long-term price appreciation for bitcoin.
- A more aggressive 50 basis point cut may cause a temporary 8% price spike, followed by a correction.
Potential Bitcoin Price Drop in September
Experts predict that bitcoin could experience a 15-20% price drop after a rate cut, as historical data shows a pattern of decreasing cycle peaks in percentage returns and bull market corrections.
- Bitcoin’s price could dip to around $60,000 pre-rate cuts, with a potential bottom around the low $50,000s to mid $40,000s.
- September historically sees high volatility for bitcoin, with an average return of -4.78% and significant declines since 2014.
Despite the expected volatility in September, Bitfinex analysts maintain a positive outlook on bitcoin, emphasizing that it presents both risks and opportunities for traders.
Hot Take: Be Cautious Amidst Changing Market Dynamics
As the Federal Reserve prepares to announce its new monetary policy, keep a close eye on how bitcoin prices react to these changes. Stay informed and consider the potential impact on your investment strategy. Volatility may provide opportunities for gains, but be prepared for potential risks as well. Educate yourself and make well-informed decisions in the evolving crypto market landscape.
Sources:
1. https://blog.bitfinex.com/wp-content/uploads/2024/09/Bitfinex-Alpha-120.pdf
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