As the cryptocurrency market braces for the upcoming Federal Open Market Committee (FOMC) meeting on September 18th, analysts are warning that Bitcoin could face a significant price drop, potentially declining by as much as 20%. The possibility of a US Federal Reserve interest rate cut, intended to counteract recession fears, could have unintended consequences for the world’s leading cryptocurrency.
In a recent report by Bitfinex, analysts highlighted the precarious position Bitcoin finds itself in amidst ongoing economic uncertainty. The report emphasized that while a modest 25 basis point cut might lead to long-term price appreciation for Bitcoin due to increased liquidity, a more aggressive 50 basis point cut could trigger a correction, deepening Bitcoin’s recent slump.
The report cautioned traders to be prepared for a potential 15-20 percent decline in Bitcoin’s value, bringing it down to a range of $40,000 to $50,000.
The growing concern over a potential recession has been exacerbated by the Sahm Rule Recession Indicator, which jumped from 0.43 to 0.53 following disappointing U.S. jobs data in early August. This spike signals a heightened risk of economic downturn, further fueling speculation about the Federal Reserve’s next move.
The possibility of a rate cut is supported by the current decline in inflation and a weakening job market, which align with the Federal Reserve’s dual mandate to control inflation and promote economic growth. However, the extent of the cut remains uncertain. At the recent Jackson Hole symposium, Federal Reserve Chair Jerome Powell hinted that the time for an interest rate cut had arrived but refrained from providing specifics.
Lottie Gosling, an economist at Investec, suggested that very weak economic data could increase the likelihood of a 50 basis point rate cut. Conversely, stronger data might rule out such a significant reduction. Gosling noted that while Powell did not explicitly mention the possibility of a 50 basis point cut, a further deterioration in the labor market could push the FOMC toward more aggressive easing measures.
September has historically been a volatile month for Bitcoin, and the anticipated Fed rate cut only adds another layer of complexity to an already unpredictable market. Analysts reiterated that this volatility could be exacerbated by the Fed’s actions, making it a challenging time for Bitcoin traders.
If Bitcoin were to experience the projected 20% decline, it would drop to around $46,000, a level not seen since February 8th of this year. This view aligns with previous analysis from 10x Research, which identified the low $40,000 range as a potential entry point for the next bull market. However, not all analysts agree on the severity of the potential correction.
Popular crypto analyst Moustache believes that Bitcoin’s market bottom could be closer to $57,000, citing historical fractal patterns that suggest key support and resistance levels. Analysis points to $57,000 as a significant support level, with a potential move below this threshold likely triggering the liquidation of over $860 million in cumulative leveraged short positions, according to data from CoinGlass.
Despite the potential for short-term pain, many analysts remain optimistic about Bitcoin’s long-term prospects. Historical and technical patterns suggest that a six-figure Bitcoin is still within reach.
Notably, the popular trader Titan of Crypto has identified the final quarter of this year as a potential breakout period for Bitcoin, describing it as having “epic” potential for price action. This sentiment is echoed by other analysts who believe that, while the near-term outlook may be bleak, the long-term trajectory for Bitcoin remains bullish.
#Bitcoin Golden Cross is Happening 💥
A Golden Cross between the MA100 🔵 and MA200 🔴 is unfolding—something we've never seen before.
This could trigger the most explosive bull run yet. 🚀 pic.twitter.com/RK8GhbpDrd
— Titan of Crypto (@Washigorira) September 2, 2024
As the FOMC meeting approaches, the cryptocurrency market is poised for a period of heightened volatility. Traders and investors must carefully navigate the potential impact of the Federal Reserve’s actions on Bitcoin’s price.
While the possibility of a 20% decline looms large, the long-term outlook for Bitcoin remains positive, with many analysts still predicting that the cryptocurrency could reach new heights in the future. In this uncertain environment, caution and vigilance will be key for those looking to capitalize on Bitcoin’s next big move.
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