While the FED's interest rate cut is expected to cause Bitcoin to rise in September, which is known as a seasonally bearish month, Bitfinex analysts analyzed how the interest rate cut could affect the BTC price.
Publishing its weekly analysis report Bitfinex Alpha, Bitfinex noted that the upcoming FED interest rate decision could significantly affect Bitcoin's volatility and long-term trend.
Analysts made a dual assessment, stating that Bitcoin’s recent gains were driven by moderate FED expectations.
Accordingly, a 25 basis point cut by the FED could increase prices, while a 50 basis point cut could cause a sudden increase followed by a correction.
At this point, analysts stated that a 25 basis point interest rate cut would initially cause a sell-the-news event in Bitcoin, but could then initiate a gradual uptrend for BTC.
“A 25 basis point cut could signal the start of a typical easing cycle, leading to long-term price appreciation for Bitcoin as liquidity increases and recession fears subside.
On the other hand, a more aggressive 50 basis point cut could cause a sudden price increase in BTC. However, this increase is likely to be short-lived. This increase could be followed by a correction, as in the past, where aggressive rate cuts initially increased prices but economic uncertainties slowed the gains.
Bitcoin Could Bottom Between $40,000-$50,000!
While the historical volatility in September and Bitcoin’s ties to global macroeconomic trends have led to further uncertainty, analysts have also predicted that Bitcoin could see a 15-20% drop following the Fed rate cut, with a potential bottom between $40,000-$50,000.
“This is not an arbitrary number. It is based on historical data that shows that cycle peaks in percentage returns typically decrease by 60-70% each cycle, with a decrease in average bull market corrections.
“However, this outlook could change rapidly if macroeconomic conditions change.”
Bitfinex analysts added that they maintain a long-term bullish outlook for Bitcoin despite the short-term bearish outlook.
*This is not investment advice.