Bitcoin may be set for increased volatility as the United States Federal Reserve prepares to announce its first interest rate cut since the onset of the COVID-19 pandemic. Currently trading at $59,656, Bitcoin has lost key support at the $60,000 level, and analysts suggest the Fed’s decision could introduce more uncertainty into the market.
Bitfinex analysts told Cointelegraph that depending on whether the Fed cuts rates by 25 or 50 basis points, Bitcoin could experience significant swings. A smaller cut might trigger cautious de-risking, while a larger reduction could lead to bullish sentiment. “This expected volatility might be reflected in flows across ETFs and perpetual markets, which are likely to exhibit increased fluctuations,” the analysts explained.
The Fed’s rate cut decision, expected on Sept. 18, could be a major catalyst for Bitcoin’s next move. Some market experts are predicting a potential breakout for the cryptocurrency in October, which could be spurred by the expected rate reduction.
Bitcoin had recently climbed back above the $60,000 level on Sept. 14 for the first time since late August, but it quickly lost that support. Bitfinex analysts noted that Bitcoin appears to have found a bottom at around $52,000, with a subsequent 15% recovery backed by $403.9 million in Bitcoin ETF net inflows over the past week.
While some in the market expect a 50-basis-point cut, CME FedWatch data shows a split, with a 67% chance of a larger cut and 33% odds of a smaller, 25-basis-point cut. Bitfinex analysts, however, believe the Federal Reserve is more likely to opt for a smaller reduction due to concerns about core inflation.
Looking forward, historical patterns suggest that Bitcoin could be poised for a strong rally in the coming months. October, November, and December have traditionally been bullish for the cryptocurrency, with analysts suggesting that Bitcoin could see prices rise above $92,000 by the end of the year.