Could Fed Rate Cut Timing Be Bullish for Bitcoin?

This week's Federal Reserve Open Markets Committee meeting could reveal when the Fed will cut rates, which could have implications for Bitcoin exchange-traded fund (ETF) strategies. Despite favorable jobs and economic data, inflation did not fall short of the Fed's 2% target, making this week's announcement difficult for Chairman Jerome Powell.

When the Federal Reserve meets Tuesday through Thursday, it is expected to decide whether to raise or leave the federal funds rate unchanged. Experts mostly agree that the US will not enter a recession, but the timing of when the Fed will start cutting rates in 2024 will be crucial for Bitcoin and stocks.

Economists say the Fed's target is still unknown

Erin Brown, portfolio manager of PIMCO's multi-asset strategies, said at Bloomberg Wall Street Week on Friday that ahead of the release of the US jobs numbers, some investors were seeing a 1.27 percent cut in interest rates next year. Later, the jobs report dampened expectations that it would show rising wage growth and inflation in the fourth quarter.

But right now, at least, I'm not pricing in a recession next year, but I expect a slower growth environment in the U.S., especially outside of the U.S., to slow growth at the end of next year.

Of course, some experts say that it is too early to destroy the champagne. Federal gauges of inflation are still above the Fed's 2% target and have recently fallen less than earlier this year.

Also, premature cuts may accompany a sluggish economy. Dan Rismiller, an economist at Strategas, cautions that the soft-landing scenario still has many hurdles, including unemployment below 4 percent and whether the U.S. economy can grow unimpeded amid high interest rates.

Read more: How to prepare for a Bitcoin ETF: A step-by-step approach

Others suggest that the re-entry of workers after the recent auto workers and Hollywood strikes will make the jobs numbers less robust than they appear at first glance, while others suggest that an inverted yield curve is a sign of a year-end recession in 2024.

How Bitcoin Can Drive Fed Policy

Fears of a recession still abound, but the Fed won't start cutting rates tomorrow. Any hint of a future bearish period could fuel Bitcoin's rally as long as the asset doesn't fall below $40,000, some experts say.

If the U.S. Securities and Exchange Commission approves the transfer of funds starting in January, bitcoin will be able to rally independently of federal policy. If the Fed cuts rates in Q1, this will lower bond yields and make Bitcoin more attractive to investors via ETFs.

Bitcoin's expected halving at the end of April could further boost the price by reducing the amount of Bitcoin issuance, although lower bond yields are likely to stimulate demand for ETFs. Considering how Fed policy will devalue fiat currency at will, Bitcoin's halving will make it a safe and secure store of value.

Read more: Bitcoin Half Cycles and Investment Strategies: What You Need to Know

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