While the possibility of a FED interest rate cut in September has increased following the positive CPI figures from the USA yesterday, the probability of a September interest rate cut is priced at 88.1%, according to CME FEDWatch.
While it was expected that the FED's first interest rate cut in September would support the rise in Bitcoin and altcoins, 10X Reserach founder Markus Thielen, who attracted attention with his forthright statements, said that the situation is not as simple and rosy as it seems.
Thielen stated that the positive inflation data received yesterday probably laid the groundwork for the FED to start reducing interest rates this year, and claimed that the markets may have already priced in a possible FED interest rate cut this year.
“Rate cut expectations have dominated crypto and traditional market sentiment since the second half of 2022.
And the prospect of interest rate cuts has been among the key catalysts behind Bitcoin's rise from a low of $15,000 in 2022 to record highs above $73,000 this year.
“As a result, the expectation of a rate cut may already be priced in, and an actual rate cut may receive only a modest reaction from the market.”
What Does Historical Data Point to in Bitcoin FED Interest Rate Relationship?
The experienced analyst argued that interest rate cuts should be made at a time of low inflation and a developing economy in order to have a positive effect on the BTC price.
Pointing out that, according to historical data, Bitcoin's highest rise occurred during the periods when the FED completed its interest rate hike cycle, the analyst said that the first stimulus decisions were generally welcomed more moderately.
At this point, Thielen cited 2019 as an example.
“If a cut is made in a time of low inflation and a developing economy, the positive impact on asset prices will be more pronounced.
At this point, if the Fed lowers interest rates in September 2024 solely due to inflation concerns, this could mean bullishness for Bitcoin in the short term.
“However, if an interest rate cut comes while economic uncertainties persist, it could send a negative signal and encourage investors to move money out of riskier assets and into safer ones such as government bonds.”
*This is not investment advice.