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Economist Predicts Bitcoin's Short-Term Decline, But Expects Surge with Fed Rate Cuts

Economist Predicts Bitcoin’s Short-Term Decline, But Expects Surge with Fed Rate Cuts

The Bitcoin Price and the Impact of the US Federal Reserve

The Bitcoin price has experienced some pressure following the decision by the United States Federal Reserve (Fed) to hold interest rates steady. This unexpected dip in the value of Bitcoin goes against recent expectations that the central bank would lower interest rates, which typically has a positive effect on Bitcoin.

Short-Term Pain for Bitcoin

Crypto analyst and economist, Alex Krueger, believes that while Bitcoin prices may fluctuate in the short term, they will eventually recover as the Fed begins to lower interest rates. Krueger argues that the Fed’s decision to hold rates steady was a strategic move to manage market expectations, but overall, their stance is dovish, and rate cuts will likely occur in May or June.

Krueger acknowledges that the market may be overestimating the number of rate cuts expected in 2024. Despite the recent drop in price, he predicts that Bitcoin will quickly correct itself before experiencing a sharp rebound in the coming weeks and months.

Debunking Bearish Sentiment

In a post on X, Krueger debunks the notion that rate cuts are bearish for Bitcoin. He explains that rate cuts only have a negative impact when they occur during a strong recession, which is not currently the case. Additionally, tapering inflation data supports this perspective.

Krueger also highlights that the “put” is back on after two years. This refers to the commitment by the Fed to provide liquidity and support to financial markets if necessary. This commitment indicates a loose monetary policy and readiness to support banks.

Will BTC Break Above $50,000?

Although Bitcoin prices are currently under pressure, technical analysis suggests an uptrend. Buyers have the upper hand, and while the price is still far from its December 2023 highs, there is potential for a rebound. The immediate support level is around $39,500, but for the uptrend to continue, Bitcoin prices must break above $50,000.

Source: TradingView

Hot Take: The Future of Bitcoin

While the recent dip in Bitcoin’s price may be concerning, it’s important to consider the larger context. The Fed’s decision to hold interest rates steady is only a temporary setback. Analysts like Alex Krueger believe that rate cuts are on the horizon and will ultimately benefit Bitcoin in the long term. Additionally, tapering inflation and the Fed’s commitment to supporting financial markets provide further reasons for optimism. So, while there may be short-term fluctuations, Bitcoin has the potential to bounce back and continue its upward trajectory.

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Economist Predicts Bitcoin's Short-Term Decline, But Expects Surge with Fed Rate Cuts