FOMC Meeting Begins Today: Why Bitcoin Might Not Benefit From Rate Cuts

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As a seasoned analyst with over two decades of experience in the financial markets, I have seen my fair share of Fed rate cuts and their impact on various asset classes, including Bitcoin. While it is true that historically, lower interest rates have been bullish for Bitcoin, the situation this time around might be different.

Today marks the start of the FOMC meeting, where the U.S. Federal Reserve is anticipated to make an interest rate adjustment following their two-day gathering. Traditionally, a reduction in the Fed’s interest rate has been favorable for Bitcoin and the cryptocurrency market, leading to price increases. Nevertheless, distinguished economist Peter Schiff posits that Bitcoin may not experience any benefits from this potential rate cut on this occasion.

FOMC Meeting Starts Today, But Rate Cuts Might Not Be Bullish For Bitcoin

Peter Schiff posited in a recent post that today’s FOMC meeting rate cuts might not boost Bitcoin, as he believes it’s improbable that the upcoming rate reductions will significantly lower borrowing rates for many individuals. He also pointed out that mortgage rates may have already hit their lowest point and could potentially rise further, citing an example to support his claim.

Simultaneously, Schiff stated that the Federal Reserve might revert to Quantitative Easing (QE) to curb increasing rates, but warned that such a move would weaken the dollar and spark inflation again. If this scenario unfolds as the economist foresees, it could potentially lower Bitcoin’s value.

The predicted drop in interest rates could lead to a boost in the value of Bitcoin, as it increases the amount of available funds within the Bitcoin market. Yet, according to Peter Schiff’s forecast, borrowers may not actually benefit from these lower rates, which means the anticipated influx of liquidity into Bitcoin might not materialize as planned.

Additionally, it’s concerning that the US economy is experiencing higher inflation rates once more, as this trend could negatively impact Bitcoin, given its historical sensitivity to macroeconomic factors this year. This increased inflation might lead investors to reconsider their investments in risky assets such as Bitcoin due to reduced confidence.

It’s worth noting that economist Peter Schiff predicts Bitcoin’s price might fall to around $20,000 in the near future. Known for his preference for Gold over Bitcoin, Schiff points out a potential triple top pattern on Bitcoin’s price graph, suggesting possible factors that could lead to this Bitcoin downturn.

A 75 Bps US Fed Rate Cut Now On The Cards

Prior to the FOMC meeting, Senator Elizabeth Warren and two other Democrats have advocated for Federal Reserve Chair Jerome Powell to lower interest rates by 0.75 percentage points (or 75 basis points) to safeguard the U.S. economy. Whether or not the Fed will follow this recommendation is yet uncertain; however, it introduces a fresh outlook to the situation. Previously, predictions pointed towards the U.S. Central Bank reducing rates by either 0.25% or 0.50%.

Currently, there’s a strong leaning towards a 0.5 percentage point (50 bps) interest rate increase, according to CME FedWatch data, with a probability of 67% compared to a 25 bps increase, which now stands at 33%. Some financial experts suggest that US inflation hasn’t decreased enough for the Federal Reserve to lower rates by 0.5 percentage points at this time.

Accordingly, financial institutions Goldman Sachs and JPMorgan anticipate a reduction of 0.25 percentage points in the U.S. Federal Reserve interest rate. They speculate that commodities such as gold might decrease temporarily due to this broader economic move.

According to well-known cryptocurrency expert Lark Davis, there may be significant fluctuations in the near future for Bitcoin’s value, potentially leading to a drop after the Federal Open Market Committee (FOMC) meeting. Despite this short-term uncertainty, Davis remains optimistic about Bitcoin’s prospects in the long run.

A 25bps rate cut is BULLISH

A 50bps rate cut is also BULLISH

Yes, there could be some volatility in the short-term

But in the long term, it’s all mega bullish.

— Lark Davis (@TheCryptoLark) September 16, 2024

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2024-09-17 11:28