As the crypto community awaits the Federal Reserve’s (Fed) rate cut announcement on September 18, the stakes are high for Bitcoin (BTC) and the broader financial landscape. This upcoming decision marks the first central bank rate cut since the Fed slashed its key rate to near zero in March 2020 amid the COVID-19 pandemic.
Will A 50bps Cut Spark A Bitcoin Bull Run?
According to CME Group’s FedWatch tool, markets are currently pricing in a 59% chance of a half-percentage-point rate cut and a 41% chance of a quarter-point cut. There’s an overwhelming expectation that by the end of 2024, the Fed could implement up to 100 basis points in cuts, with nearly 60% odds of 125 basis points.
This suggests that investors anticipate at least one or two substantial rate cuts in the three remaining Fed meetings of the year, starting with this week’s announcement.
The potential effects of a 50 basis point cut remain hotly debated within the crypto industry. Market expert Crypto Rover argues that such a cut could reignite a bull run for Bitcoin, stating that the conditions could lead to “super bullish” prospects.
Similarly, analyst Lark Davis recalls how Bitcoin previously surged following past rate cuts, predicting that if history repeats, the next 6-12 months could see significant price increases for the largest cryptocurrency on the market.
Optimism Vs Historical Caution In Crypto Market
In addition to optimism and bullish expectations, other analysts express caution. EmperorBTC predicts an initial market pump following the rate cut, driven by cheaper borrowing costs.
However, the analyst warns of profit-taking by short-term holders leading to a subsequent market dump, suggesting a “sell the news” scenario that could leave many investors disillusioned before the market stabilizes and resumes growth.
On the other hand, technical analyst Justin Bennett offers a more cautionary historical perspective. He points to the market’s performance during the Fed’s rate cuts in 2007, when the Nasdaq 100 Index retraced significantly after the initial cuts, suggesting that the same pattern could emerge in 2023.
Bennett’s analysis suggests that current market conditions may mirror previous downturns, calling into question the optimistic projections shared by some for the broader digital asset market.
In a similar vein, NewsBTC reported on Monday the analysis of crypto strategist Doctor Profit, in which he highlights a divided sentiment in the market regarding the rate cut, with equal chances of a 0.25% or 0.50% reduction.
However, the analyst is leaning towards the larger cut, arguing that failure to take decisive action could lead to turmoil reminiscent of “Blood Monday” on August 5, when Bitcoin experienced a sharp decline to $48,900.
Despite the divided sentiment in the market, Bitcoin has jumped from the $57,000 mark traded on Monday to a current price of $61,000, recording a surge of nearly 6% in a matter of hours in anticipation of tomorrow’s announcements.
Featured image from DALL-E, chart from TradingView.com