Bitfinex Alpha: Bitcoin May Bottom Between $40,000 And $50,000 After Federal Reserve Interest Rate Cut
In Brief
Bitfinex Alpha shared a forecast of the possible impact on Bitcoin’s price when the Federal Reserve decides to lower interest rates.
The digital asset trading platform Bitfinex Alpha has published its most recent market analysis report, providing a forecast of the possible impact on Bitcoin’s price when the Federal Reserve decides to lower interest rates.
Bitfinex Alpha notes that the Federal Reserve’s expected decision on interest rates in September is likely to impact Bitcoin’s short-term volatility and its long-term trend. Starting in early August, BTC increased by more than 32%, largely due to traders’ expectations of potentially dovish comments from the Federal Reserve. A 25 basis point rate reduction could indicate the start of a standard easing cycle, potentially causing a sustained rise in Bitcoin prices as liquidity improves and concerns about a recession diminish.
On the contrary, the firm indicates that a larger rate cut of 50 basis points could result in a sharp rise in Bitcoin’s price in the short term. However, this may be followed by a correction if concerns about a recession intensify. During the past week, Bitfinex Alpha has noted that spot holders have been lowering their risk exposure while speculators in the perpetual contract market are taking their chances to capitalize on price dips. The firm still sees substantial, long open interest in Bitcoin perpetual contracts.
Bitfinex Alpha estimates that there could be a 15-20% reduction in interest rates, with BTC potentially finding a lower range between $40,000 and $50,000. This estimate is not arbitrary but is derived from historical patterns, including a peak reduction of approximately 60-70% in percentage returns per cycle and a decreasing average retracement during the bull market. But, this analysis could also be altered if the macroeconomic environment shifts. For traders, these periods are characterized by a high level of uncertainty.
September’s Volatility And Global Economic Factors Set The Stage For Bitcoin’s Price Movements
Historically, September has been volatile for Bitcoin, with an average return of -4.78% and a typical peak-to-trough drawdown of about 24.6%. Such volatility, along with the possibility of a ‘sell the news’ moment following an interest rate cut, might offer risks and opportunities for traders.
Additionally, Bitcoin’s rising correlation with traditional risk assets indicates that its price movements might be impacted by global macroeconomic conditions. Actions by major central banks—like the ECB potentially halting rate hikes in the environment of slowing growth and the Bank of Japan‘s cautious stance in response to a slowing economic recovery—could affect global markets and, consequently, impact digital assets like Bitcoin.
As of the writing time, Bitcoin is trading at $58,282, showing a slight increase of 0.14% over the past 24 hours. The cryptocurrency’s 24-hour low and high were $57,279 and $58,660, respectively, according to CoinMarketCap data.
Recent concerns among traders have arisen as Bitcoin recently slipped to the $57,000 level. This decline in price is largely attributed to $277.12 million in weekly outflows from Bitcoin exchange-traded funds (ETFs) as of August 30th. Additionally, although Bitcoin whale accumulations have been increasing, the cryptocurrency has not yet begun to show an upward trend.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
