Bitcoin Price Wobbles: Will a Fed Rate Cut Push it Lower?
Bitcoin (BTC) has experienced a recent price decline, dropping 10% over the past ten days to reach $56,664. This dip comes despite a relatively stable stock market and near record highs for gold. Analysts are divided on the reasons behind the decline and what the future holds for Bitcoin.
Macroeconomic Jitters and Shifting Focus
Trader DamiDefi suggests that recession fears in the US initially impacted Bitcoin. However, the focus has shifted to monetary policy and the US dollar’s performance. The “bullish narrative” for Bitcoin hinges on the expectation of a looser Federal Reserve policy, potentially meaning lower interest rates. This would stimulate the economy and potentially make Bitcoin a more attractive investment compared to lower-yielding traditional assets.
Mixed Signals and Uncertain Job Market Data
While the US central bank has reduced inflation (CPI at 2.9% in July, the lowest since March 2021), continuing jobless claims raise questions about a potential 0.75% interest rate reduction by year-end. The next jobs report on September 6th will be crucial, with forecasts suggesting the US economy added enough jobs in August to support a 0.25% rate cut.
Investors are also keeping an eye on the stock market, where recent strong earnings reports haven’t necessarily translated to stock price increases. This adds to the overall uncertainty in the market.
Spot Bitcoin ETF Outflows and Declining Miner Profitability
Outflows from spot Bitcoin exchange-traded funds (ETFs) and declining miner profitability are dampening investor sentiment. The lack of inflows into these ETFs raises concerns about investor confidence in Bitcoin’s future value.
Additionally, Bitcoin miner profitability is nearing all-time lows, raising fears of a potential sell-off by miners looking to cover costs. This could further pressure Bitcoin’s price.
Fed Rate Cut: Boon or Bane for Bitcoin?
Analysts are divided on the impact of a potential Fed rate cut on September 18th. Some, like Bitfinex analysts, believe it could trigger a 15-20% decline in Bitcoin’s price, potentially pushing it down to $40-50,000. They point to September’s historical volatility for Bitcoin and the added complexity of the Fed decision.
However, others argue that lower interest rates typically make riskier assets like Bitcoin more attractive compared to bonds and term deposits.
Bitcoin’s Price Direction: A Tug-of-War
Bitcoin’s current price sits at $57,754, reflecting a slight decline over the past week. Opinions vary on its future trajectory. Some analysts believe a price drop to the low $40,000s could be a buying opportunity before a potential bull run. Others see the current $60,000 level as a consolidation zone for long-term holders.
Technically, Bitcoin is facing resistance around $57,650 and needs to overcome this hurdle to see further upside. Conversely, a failure to hold above $58,000 could lead to another decline towards the $55,000 support zone.
With the Fed decision looming and various economic factors at play, the near-term future of Bitcoin’s price remains uncertain.
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