Fed rate decision could briefly boost bitcoin, but recession fears could lead to a correction
The US Federal Reserve's interest rate decision this month could significantly influence both short-term volatility and the long-term trajectory of Bitcoin, according to analysts.
"A 25 basis point cut likely signals the start of a typical easing cycle, while a more aggressive 50 basis point cut could cause an immediate surge in bitcoin price, but this could be followed by a correction as recession concerns mount," Bitfinex analysts said.
Economists are currently concerned about several recession indicators, including the Sahm Rule, which links rising unemployment to higher recession risks, as job losses typically lead to reduced spending and slower growth.
Moreover, the inverted yield curve on US Treasury bonds suggests a 50% chance of a recession in the next 12 months, according to analysis by the New York Federal Reserve.
If recession signs hit risk assets, Bitfinex analysts predict that bitcoin could fall by as much as 20% from its current value in the weeks following the US central bank’s interest rate decision on September 18, possibly finding a bottom between $40,000 and $50,000.
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