Upcoming Fed Rate Cuts: Bitfinex Analyzes Bitcoin Could Plunge To $40K

The upcoming US Fed interest rate cuts could adversely impact the already declining Bitcoin’s price, as per the analysts at Bitfinex. Though the interest rate cuts are usually bullish for Bitcoin, the Bitfinex report estimated a short-term price decline this time. In their latest research report published earlier this week, they mentioned we could expect Bitcoin’s price to decline significantly by 15-20% this month.

How Fed Rate Cuts Influence Bitcoin’s Price?

Bitfinex analysts published a research report on September 2, analyzing how the upcoming US Fed interest rate cuts could potentially impact Bitcoin price. No matter the US Fed’s decision on the interest rates, Bitfinex analysts opine it will have a significant influence on Bitcoin’s short-term volatility and long-term trajectory.

The Bitfinex analysts predict a 25 basis point interest rate cut could signal the beginning of an easing cycle and lead to a long-term price appreciation. However, a 50 basis point cut could lead to a short-term price spike followed by a correction. Additionally, the fear of recession increases with aggressive interest rate cuts.

Overall, it is certain there is going to be a slash in the interest rates and usually these rate cuts bring a spike in Bitcoin’s price. However, there is one instance in 2019 where the interest rate cut had an adverse effect on the BTC price. It decreased by around 50% as a result of the 50 basis point cut. According to the report, the same could repeat this time considering the current market conditions.

Bitcoin To Trade in the $40-50k Price Range

As the next FOMC meeting is going to take place on September 17-18, interest rate cuts are going to dip the Bitcoin’s price further over the short term. Referring to the same, the Bitfinex report estimates a considerable decline of 15-20%. In terms of the price range, Bitcoin could go as low as $40-50k. However, they also pointed out that these figures could easily vary based on macroeconomic conditions.

Bitcoin recently tested at the $49,000 - $50,000 level a few weeks back. Though it is trading at a much lower price of around $56,000, at the time of writing, compared to its all-time high value of over $73,700, its price increased by 32% in the last month. In contrast, the past week witnessed a decline in its price.

Botsfolio’s Take:

Botsfolio analysts say, “If the Bitcoin drops below $50,000 and remains there for over a week, the likely causes would be a liquidity crunch due to recession fears, potentially triggered by a high unemployment figure this Friday or the CPI data on Sept 11 and no rate cut from Fed. However, with the expected Fed rate cuts, BTC is anticipated to stay above $55,000 until the upcoming Federal Reserve meeting.”