Bitrabo Editorial
The price of Bitcoin dropped to $57,100 on Monday, down from a high of $65,000 in late August. The upcoming interest rate cut by the US Federal Reserve could lead to further challenges for the leading cryptocurrency.
September’s Impact on Bitcoin Price
Bitfinex Alpha’s recent report indicates that the interest rate decisions this month could have a significant effect on Bitcoin’s short-term volatility and long-term direction. Bitcoin has surged over 32% since early August, primarily driven by expectations of dovish remarks from the Federal Reserve.
If a 25 basis point cut signifies the beginning of a easing cycle, it may boost liquidity and result in long-term price growth for Bitcoin. Alternatively, an aggressive 50 basis point cut could cause an immediate price spike followed by a correction due to resurfacing recession concerns.
Recent trading trends show spot holders reducing risk while perpetual market speculators attempt to capitalize on price dips. There is a notable long open interest in Bitcoin perpetual contracts.
However, Bitfinex warns that a rate cut might lead to a 15-20% drop in the Bitcoin price, potentially stabilizing between $40,000 and $50,000. The forecast considers historical data showing diminishing peak returns in each cycle and reduced corrections during bull markets.
September historically has been volatile for Bitcoin, with an average return of -4.78% and peak-to-trough declines around 24.6%. The report also notes Bitcoin’s growing correlation with traditional risk assets like the S&P 500, indicating its price movements mirroring broader macroeconomic conditions.
Increasing Political Involvement Led By Trump
Global economic dynamics also play a role, with actions from central banks like the European Central Bank pausing rate hikes due to slowing growth, Japan’s cautious recovery approach, and China’s liquidity measures impacting the cryptocurrency market.
In the US, disinflation persists due to strong household consumption and wage growth exceeding inflation. The Federal Reserve’s preferred inflation measure, the PCE index, rose by 2.5% in July, reinforcing price stability. Recent GDP growth revisions to a 3% annual rate for Q2 alleviate concerns of an economic slowdown.
On the political side, there’s an increasing focus on cryptocurrency regulation. Presidential candidate Donald Trump aims to position the US as a crypto leader, particularly through the World Liberty Financial project. The 24X National Exchange proposes a 24/7 trading platform for cryptocurrency ETFs to enhance market accessibility.
At the moment, the Bitcoin price has climbed back to $59,270 after dipping near $57,000 on Monday.
Featured image from DALL-E, chart from TradingView.com