Bitcoin price is trading at $60,200 with daily gains of 3.1% as media eyes focus on the FOMC meeting tomorrow, Wednesday, September 18.
The important fact is that the Federal Reserve (FED) could carry out an interest rate cut, the first since 2020 and which has important macroeconomic implications. It could also have a major effect on the Cryptocurrency market.
It is worth noting that it is still unclear whether the Fed will cut rates by 25 or 50 basis points, which creates considerable uncertainty.
However, the market is fairly confident that there will be a rate cut, given that Jerome Powell himself said at the end of August that the time had come to cut rates. So most experts agree on this, however, there is no consensus on how much rates would be reduced.
The problem is that even if we knew by what percentage interest rates would be reduced, we do not know how the market would react.
It is worth noting that according to CME’s FedWatch tool, there is a probability 69% that there will be a 50 bp cutWhile last week this probability was only 34%.
How will the price of Bitcoin react?
According to various analysts, the price of Bitcoin will be difficult to predict after the Federal Reserve makes its decisions on Wednesday. Some predict drops as low as $53,000 and others predict rises as high as $65,000..
This great divergence of opinions is due to the fact that we are at a crucial point and the price of BTC could go up or down. Depending on the decision taken by the FED: whether to reduce interest rates by 50 points or do so by 25 points.
Although reputable reports such as one from JPMorgan indicate that there will definitely be a cut.
Other, more optimistic analysts are leaning towards a scenario where the interest rate cut will be 50 points. Even if it were to send a message of weakening of the US economy, it would be bullish for cryptocurrencies (not for the dollar).
On the other hand, if the interest rate cut is only 25 points, we could see a strengthening of the dollar, which will not be beneficial for the price of BTC.
Bitcoin price remains above $60,000, just hours before the FED decision. Source: CoinMarketCap.
By what percentage will interest rates be reduced?
We have already established that the markets agree that the Federal Reserve will reduce interest rates. At Polymarket, 98% of bettors are opting for a rate cut next Wednesday.
Even JPMorgan is optimistic about rate cuts, although it warns that if the data disappoints in the coming months, then the Fed is likely to be behind in its decision-making and cuts will become “a confirmation of weakness, rather than an upward push.”
It is worth remembering that BTC has historically reacted to interest rate decisions, for example, during the pandemic, when the FED kept its interest rates close to zero, BTC experienced a huge bullish momentum up to $69,000. This does not indicate that the price of Bitcoin depends exclusively on the decisions of the Federal Reserve, but there is a correlation between these decisions and the price of BTC.
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