How Will the Fed's Interest Rate Decision Affect Bitcoin? A 50-Base Warning from the Chief Strategist

This week, there will be a rare period of uncertainty in the markets. All eyes are on the US Federal Reserve's (Fed) interest rate cut decision.

This uncertainty has caused the rise in the price of Bitcoin (BTC) to pause. While the Fed is expected to announce an interest rate cut on Wednesday, September 18, 2024, this decision has the potential to support risky assets, including the cryptocurrency market.

However, investors are divided on the size of the interest rate cut. Fed fund futures expect a 50 percent chance of interest rates falling to the 5-5.25 percent range with a 25 basis point (bps) cut. At the same time, the possibility of a 50 percent larger, 50 basis point cut to the 4.7-5 percent range is also on the agenda.

Ziraat Yatırım's report emphasized the importance of the Fed's interest rate decision for the markets. The report said, “While the slowdown in the labor market and the decline in inflation have created room for the Fed to cut interest rates, the data released last week also allowed the Fed to start the rate cutting cycle more normally. The Fed is expected to cut interest rates by 25 basis points at this week’s meeting.”

The Fed’s cut decision may affect Bitcoin

Due to this uncertainty, Bitcoin fell from its recent lows of $60,660 to $58,700. Marc Chandler, chief strategist at Bannockburn Global Forex, said a 50 basis point cut could be a panic signal for the market and could reduce demand for risky assets.

Analysts expect major volatility in the markets after the Fed’s interest rate decision.