All indications are that the stage is set for the US Federal Reserve (Fed) to announce a possible interest rate cut on September 18.
For more than a year now, these rates have been the highest in two decades, and their adjustment could trigger high volatility in the financial markets. Bitcoin (BTC) would not be exempt from this impact, generating an atmosphere of expectations divided between optimism and caution.
The tool FedWatch by CME Group estimates that the probability of a 0.5% rate cut is 15%while a 0.25% cut would increase to 85%.
Although the market in general seems optimistic, There are those who warn about the risksBrooke May, managing partner at Evans May Wealth, points out that a drastic rate cut could be a sign of an economic slowdown, which historically has not been good for stocks and volatile financial assets, a fact reported by CriptoNoticias.
This could lead investors to reduce their exposure to commonly referred to as ‘risky’ assets such as bitcoin and stocks.
Investor Craig Shapiro, from the social network X, point out that “the idea of a 0.5% cut should be ruled out.” According to him, Financial markets will not take well the reduction in liquidity expectationswhich could trigger a negative response in the market.
Although a drop in rates generally boosts economic activity, How quickly bitcoin would benefit depends on overall conditions of the economic environment.
Grayscale Research, for example, indicates that if the US economy manages to avoid a recession and remains on track for a “soft landing,” bitcoin could even retake its all-time high later this year.
September is historically a negative month for bitcoin
September has historically been a negative month for bitcoin, with an average drop of 4.5% since 2010. Matt Hougan, Bitwise’s chief investment officer, highlights that uncertainty in the markets is contributing to this weakness, which further complicates expectations for the cryptocurrency in the short term.
The debate over the timing and magnitude of rate cuts is intense. Although the likelihood of a 0.5% cut in September is low, The market expects additional cuts by DecemberThis context, coupled with the US presidential elections and the performance of bitcoin ETFs, adds even more volatility to investment decisions, Hougan explains.
For his part, analyst Jeremy Lakosh also expects a cut of 0.25% at the Fed meeting next week, but warns that Progress on disinflation has been inconsistent.
According to Lakosh, the Fed will not commit to a timetable for future rate cuts unless inflation continues to decline according to its projections.
The rate cut expected next week could bring relief to the market, but the path to stability for bitcoin and risk assets will depend on how both inflation and economic expectations develop in the coming months.
