As a seasoned analyst with over two decades of experience navigating global financial markets, I have learned to tread cautiously when it comes to predicting market reactions to Federal Reserve rate cuts. The current divide among Wall Street giants regarding the magnitude of this week’s rate cut only serves to underscore the inherent unpredictability of these situations.
This week, the potential U.S. Federal Reserve rate cuts are a significant topic in both traditional stock and crypto markets, as investors search for clues about market trends over the coming weeks. Notably, JPMorgan and Goldman Sachs anticipate a moderate 25 basis points reduction by the Federal Reserve, while some market observers are hoping for 50 basis points cuts due to elections. The question arises: Will the price of Bitcoin decrease or stabilize following the September 18 interest rate cut?
Wall Street Remains Divided on 25 bps and 50 Bps Fed Rate Cuts
Some significant players on Wall Street anticipate a substantial 50 basis point reduction in interest rates by the US Federal Reserve, while others such as Goldman Sachs and JPMorgan predict a more modest 25 basis points. Notably, Joyce Chang, Chair of Global Research at JPMorgan, foresees a 50 basis point rate cut, whereas JPMorgan’s CEO, Jamie Dimon, continues to express concerns about the possibility of recession and inflation. Lately, JPMorgan has downplayed speculations regarding a bull market following Federal rate cuts.
Goldman Sachs predicts that gold may experience a temporary, short-term dip if the Federal Reserve decides on a 25 basis point cut this week, as reported by Bloomberg on September 17. In their note to clients, analysts Lina Thomas and Daan Struyven suggest that rate cuts by the Fed could draw Western investment back into gold ETFs, a sector that has been largely absent during the strong gold price increases seen in the past two years.
Goldman Sachs observes an increase in investments towards gold ETFs and the price of gold climbing steadily over several months following a downturn. The financial institution anticipates a less aggressive 0.25 percentage point reduction in interest rates by the Federal Reserve. This year, the value of gold has skyrocketed, yet Bitcoin’s price has also surged by approximately 35% year-to-date.
On Wednesday, JPMorgan suggested that the Federal Reserve should lower interest rates by 50 basis points, with a potential reduction of another 50 basis points throughout the rest of the year. According to Joyce Chang, the Chair of JPMorgan Global Research, such a cut is expected to be 50 basis points.
As an analyst, I find myself aligning with David Kelly, the global strategist at JPMorgan Chase. He identifies the most significant threats to our economy and market as potentially aggressive actions from the Fed or negative comments from Chair Jerome Powell. In his view, instead of a 50 basis point reduction, the Federal Reserve might opt for a more modest 25 basis point cut.
A reduction of 0.5 percentage points in the Federal Reserve’s interest rate could spark intense market activity, leading to higher levels of volatility. As per the CME FedWatch tool, there is approximately a 69% chance of a 0.5 percentage point cut, and a 31% likelihood of a 0.25 percentage point cut following the FOMC meeting. Furthermore, the data suggests that the Federal Reserve might lower interest rates by a total of 1.25 percentage points this year. This could potentially ignite a significant surge in Bitcoin’s price, though with increased volatility.
Bitcoin Price May Become Unstable
During the FOMC meeting, Bitcoin’s value has been holding steady, in line with CoinGape’s forecast. If a 50 basis point interest rate reduction occurs, it could enhance investor confidence. However, the Bitcoin price movement is expected to continue showing instability.
presently, Bitcoin’s value is being exchanged at approximately $58,533. Over the past day, its lowest point was $57,501 and its highest point reached $59,154. Additionally, it’s worth noting that the trading volume has experienced a 15% surge over the last 24 hours.
The potential interest rate reduction on September 18 might initiate either a ‘risk-on’ investment climate, potentially increasing Bitcoin prices, or a ‘risk-off’ phase, causing sellers to panic due to market uncertainties. The Bitcoin price prediction takes into account the fact that Tether is generating $1 billion USDT before the anticipated Fed rate cuts.
Crypto expert Ali Martinez stated that in the short-term charts, the TD Sequential indicates a sell signal for Bitcoin. Additionally, both the Relative Strength Index (RSI) and Stochastic RSI suggest an oversold state. If Bitcoin cannot maintain a closure above $58,800, a possible correction may occur.
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2024-09-17 11:01