Tomorrow at 15:00 (GMT -3), the financial world will have its eyes on the Federal Reserve, which will announce a long-awaited cut in interest rates. Currently, the reference rate is in the range of 5.25% to 5.50%, but FedWatch forecasts indicate that there is a 65% chance that the drop will be 0.5%compared to 35% who are in favour of a more moderate cut of 0.25%.
This further haircut scenario has gained traction in recent days, and could have a direct impact on Bitcoin, which is currently trading at $59,000.
Bitcoin price evolution over the past week. Source: CoinMarketCap
What does this mean for Bitcoin in the short term?
A more aggressive 0.5% cut would have an immediate effect on markets, with investors interpreting this move as an attempt by the Fed to stimulate economic growth. This could trigger an injection of liquidity into the markets, causing risk assets such as Bitcoin to benefit from increased investor appetite.
If the Fed opts for the 0.5% cutwe are likely to see a short-term bullish reaction in the price of Bitcoin, driven by a combination of increased liquidity and renewed confidence that the US economy will maintain a solid pace. Buyers could push the price above $60,000 in the coming hours following the announcement, buoyed by enthusiasm from a more favorable monetary environment.
However, a more moderate 0.25% cut might not have the same impact. While the rate cut would still be positive for Bitcoin, investors could interpret this move as caution on the part of the Fed, limiting a potential explosive rally. In this scenario, Bitcoin could stabilize around $59,000, with minor fluctuations, while markets process the decision.
What could Jerome Powell say about the future of rates?
Following the Fed’s decision, Federal Reserve Chairman Jerome Powell will give a speech that could be key to medium-term projections. If Powell hints at possible additional cuts in the remainder of the year, we could see a wave of optimism in financial markets, with Bitcoin benefiting as investors anticipate an even more favorable environment.
A statement from Powell in favor of further cuts would be additional fuel for Bitcoin. In this case, we could see Bitcoin not only maintaining its position above $60,000, but also aiming for new highs in subsequent weeks, if the market continues to expect looser monetary policies.
Medium and long term: What to expect from Bitcoin?
Despite the short-term focus, it is also important to consider how a longer cut cycle could impact Bitcoin. Bitcoin has historically responded well to low rate environments, due to its nature as an alternative asset and store of value against the dollar.
A sustained pullback could translate into a larger bull cycle, with the price of Bitcoin aiming to surpass $65,000 or even approach its all-time highs.
However, if the Fed decides to stop cutting in the near future, or if the market becomes more cautious about monetary policy, Bitcoin could face a new phase of volatility, especially if expectations of future liquidity moderate.
How does the FedWatch tool work?
The tool FedWatch of CME Group FedWatch measures the likelihood of the Federal Reserve’s next move on interest rates, based on federal funds futures. In this case, FedWatch indicates that the majority of the market expects a cut of 0.5%, with bets on this figure increasing in recent days. This reinforces the expectation that the Fed is committed to a more aggressive approach in its cuts, which would have a direct impact on the behavior of assets such as Bitcoin.
Forecasts for possible Fed rate cuts. Source: FedWatch
Reflection
The market is about to enter a decisive phase, and Bitcoin is at the center of the scene. With a key Fed decision looming and Powell’s conference expected, crypto investors should keep an eye out for rapid market movements. If the Fed meets expectations of the 0.5% cutwe could see an immediate bullish reaction in Bitcoin. But as always in the crypto world, volatility is just around the corner, and being prepared for short- and long-term moves will be key to navigating this market.
Do you want to always be up to date with the world of cryptocurrencies? Subscribe now to CriptoTendencia’s WhatsApp channel! Here you will instantly receive the most relevant information about Bitcoin, Altcoins, DeFi, NFTs, Blockchain and the Metaverse.
Related
Crypto Keynote USA
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.