Key points
- Bitfinex analysts expect Bitcoin to hit $40,000 in September, influenced by potential Fed rate cuts.
- Historical data shows that September is a volatile month for Bitcoin, with an average return of -4.78% since 2013.
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Bitcoin (BTC) may hit the mid-$40,000 zone in September following interest rate cuts in the US, Bitfinex analysts reported.
In the last aggressive rate-cutting cycle of 2019, BTC fell by 50% after the Federal Reserve decided to cut interest rates. However, analysts highlighted that real conditions differ, as Bitcoin went through two halving events and the world economy is not dealing with a global pandemic.
“However, if we apply similar logic to the current one, one could anticipate a 15-20 percent decline in the price of Bitcoin at the time of a rate cut,” they added.
Assuming BTC price is around $60,000 before interest rates are cut, this would place a potential bottom between the low $50,000 and low $40,000 levels.
In particular, Bitfinex analysts stressed that this is not an arbitrary figure, as they are speculating on the evolution of macroeconomic conditions.
Potential outcomes
Analysts predict that a 25 basis point rate cut could kick-start a gradual uptrend for Bitcoin after an initial news sell-off event. This scenario indicates the Fed’s confidence in economic resilience and could lead to long-term price appreciation as recession fears ease.
On the other hand, a more aggressive 50 basis point cut could trigger an immediate increase of up to 8% in the price of Bitcoin due to higher liquidity expectations.
However, this surge could be short-lived, possibly followed by a correction like past cases where aggressive rate cuts initially boosted asset prices before economic uncertainties tempered gains.
Furthermore, historical data shows that September has an average return of -4.78% for Bitcoin since 2013, with a typical peak-to-trough decline of 24.6% since 2014. This volatility is often attributed to increased human-driven trading activity as fund managers return from summer vacation.
While the potential rate cut adds complexity to market predictions, analysts point out that when August ends in the red, September has occasionally yielded positive returns, challenging the assumption of a bearish month.
Despite the short-term caution, particularly given the historic volatility in September, Bitfinex analysts maintain a bullish long-term outlook for Bitcoin. The upcoming Federal Open Market Committee (FOMC) meeting and potential rate cuts are expected to be pivotal events for Bitcoin and the broader cryptocurrency market.
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