Fed Rate Cut Could Push Bitcoin (BTC) Toward $45K: Bitfinex Analysts

As the United States Federal Reserve (Fed) prepares to implement a new monetary policy in September, Bitfinex analysts warn that the agency's decision will have a negative impact on the price of bitcoin.

According to a recent research report from Bitfinex, the analyst group stated that BTC could fall by up to 20% if the Fed decides to cut interest rates. He noted that the expected price drop “will have a significant impact on both bitcoin's short-term volatility and long-term direction.”

The possible consequences of a Fed rate cut

The analysts noted that while Bitcoin is often viewed as a hedge against traditional financial assets, the digital asset is still influenced by macroeconomic conditions.

According to the report, BTC is up more than 32% since early August, driven mainly by traders' anticipation of comments from the Fed. However, last week Bitfinex analysts pointed to a change in market dynamics, with spot traders selling BTC heavily while futures and futures market watchers were buying.

The analysts predict that if the Fed implements a modest 25 basis point cut, the market may accept the news more quickly, resulting in “longer-term price appreciation for bitcoin as liquidity increases and recession is easily feared.”

On the other hand, implementing a more aggressive 50 basis point reduction could temporarily boost bitcoin's price by as much as 8%, but this increase would be quickly followed by a major correction.

One of the negative effects of the Fed's aggressive rate cuts on Bitcoin in 2019 was that a 50 basis point correction caused Bitcoin to drop 50% before stabilizing.

Bitfinex analysts, however, emphasized that conditions are different in the current cycle. Bitcoin has gone through two halving events since 2019, and the global economy is not currently facing the challenges of the pandemic.

Drop 15-20% for Bitcoin in September

Analysts estimate that Bitcoin may experience a 15-20% decline following the price cut. Based on historical data, the percentage returns of cycle peaks typically decrease by 60-70% each time, plus the average bull market correction.

Therefore, they project the price of Bitcoin to be around $60,000 before the price declines, making the lows between $50,000 and $40,000.

The analysts added that the historical volatility of September, especially for bitcoin, may have a greater impact on market conditions. Since 2013, September has typically averaged a -4.78% return for Bitcoin and a peak-to-pool decline of around 24.6% since 2014.

Despite the warnings for September, Bitfinex analysts remain bullish on bitcoin, whose volatility presents traders with both risks and opportunities.