According to Cointelegraph: Bitcoin's price movement is set to face significant volatility as the cryptocurrency market gears up for a pivotal week. The Federal Reserve’s rate decision on Sept. 18 is expected to shape market sentiment for Bitcoin (BTC), with predictions ranging between a potential decline to $53,000 and a rally up to $65,000, according to Australian crypto trading firm Zerocap.

Jonathan de Wet, the chief investment officer at Zerocap, noted in an interview with Cointelegraph that market expectations for a rate cut have already influenced Bitcoin’s price. On Sept. 13, Bitcoin briefly touched the $60,000 mark, marking a positive reaction to growing speculation that the Federal Reserve would reduce interest rates by a minimum of 50 basis points (0.5%). This rally, however, was short-lived, as BTC slid back to $58,000 in the following days.

Fed Rate Decision: Key Driver of Bitcoin’s Price Action

The upcoming Federal Open Market Committee (FOMC) meeting, scheduled for Sept. 18, has been the focal point for market participants. The latest data from CME Group’s FedWatch Tool suggests a 62% chance of a 50 basis point rate cut, with the remaining 38% expecting a more conservative 25 basis point cut.
 

This marks the first time since March 2020 that the Federal Reserve may cut interest rates, a move that is widely seen as a potential lifeline for risk assets such as Bitcoin. Rate cuts traditionally lower borrowing costs, incentivizing investors to seek higher returns from riskier assets, such as cryptocurrencies. This is because lower interest rates reduce the appeal of safer, low-return investments like bonds, driving capital into higher-risk sectors.

“Given the Fed has waited this long for the initial cut, Zerocap is in the 50 basis points camp, as opposed to backing the more conservative call of 25 basis points,” de Wet explained. “The Fed’s dot plot is looking more and more like the start of a rate-cutting cycle, which should support risk assets into the end of the year.”

Despite this optimistic outlook, de Wet cautioned that the immediate price reaction following the rate decision is still “tough to call.” He emphasized that lingering macroeconomic uncertainties, compounded by the approaching U.S. presidential election in November, could impact Bitcoin’s price direction in the near term.

“We’re seeing a BTC downside target of $53,000 after the recent range lows, with an upside target of $65,000 after breaking higher from the descending wedge,” de Wet added.

Historical Context: How Rate Cuts Have Affected Bitcoin

The potential impact of the Fed’s decision on Bitcoin and other risk assets has been the subject of heated debate among market analysts. Historically, rate cuts have been viewed as bullish for risk sectors, as they allow investors to borrow capital at a lower cost, fueling investments in stocks, cryptocurrencies, and other high-risk assets.

However, some analysts have pointed out that rate cuts do not always lead to a positive outcome for markets. For instance, in both 2001 and 2007, rate cuts by the Federal Reserve preceded significant recessions, as macroeconomic conditions deteriorated despite attempts to stimulate the economy.

Financial analyst Jacob King, CEO of crypto newsletter WhaleWire, expressed concerns about the parallels between today’s environment and the lead-up to the 2008 Global Financial Crisis. In a recent X (formerly Twitter) post, King warned that while rate cuts may sound positive, they could also signal deeper concerns about collapsing borrowing, spending, and investment.

“Historically, sharp cuts have preceded recessions. Why? It shows the government is scared and scrambling to reverse an overreach,” King wrote. He noted that rising unemployment, plummeting housing starts, and declining economic activity are similar to the warning signs of the 2008 financial crisis.

The U.S. Election: A Wild Card for Bitcoin’s Price

Beyond the Fed’s rate decision, the upcoming U.S. election in November is another factor weighing on market sentiment. De Wet pointed out that uncertainty surrounding the political landscape could further complicate Bitcoin’s price action. The contest between Vice President Kamala Harris and former President Donald Trump has generated significant speculation about how each candidate’s policies might impact the crypto market.

“Harris leads in the polls and had a convincing win over Trump in the recent debate. If these odds begin to shift back towards the Republicans, watch out for the long banks, energy, and Bitcoin trade with a Trump win,” de Wet said.

Trump has been vocal about his support for cryptocurrencies, calling for the U.S. to become a global hub for Bitcoin and crypto innovation. Harris, on the other hand, has been less explicit about her stance on digital assets, leading to uncertainty about how her potential administration would handle crypto regulation.

Bitcoin’s Future Remains Uncertain

As Bitcoin continues to trade near $58,000, the coming days are expected to bring heightened volatility. A rate cut by the Federal Reserve could provide short-term support for Bitcoin, pushing prices toward $65,000. However, lingering macroeconomic concerns and the uncertainty surrounding the U.S. election could lead to further downside, with some analysts predicting a drop to $53,000.

While the market awaits the Fed’s decision, many traders remain on edge, unsure whether the coming rate cut will usher in a new bull run or trigger a broader selloff. One thing is certain: the next few weeks will be crucial in determining Bitcoin’s price trajectory as we move toward the end of 2024.