Bitcoin (BTC) Faces Volatility as US Interest Rate Decisions Loom

This
month’s
US
interest
rate
decisions
are
poised
to
significantly
influence
both
Bitcoin’s
(BTC)
short-term
volatility
and
long-term
trajectory,
according
to

Bitfinex
Alpha.
Since
early
August,
Bitcoin
has
gained
over
32
percent,
driven
by
traders
anticipating
dovish
comments
by
the
Federal
Reserve.

Potential
Rate
Cuts
and
Market
Reactions

A
25
basis
point
cut
is
likely
to
signal
the
beginning
of
a
typical
easing
cycle,
which
could
lead
to
long-term
price
appreciation
for
Bitcoin
as
liquidity
increases
and
recession
fears
ease.
Conversely,
a
more
aggressive
50
basis
point
cut
might
cause
an
immediate
price
spike
but
could
be
followed
by
a
correction
as
recession
concerns
escalate.
Over
the
past
week,
spot
holders
have
been
de-risking
while
perpetual
market
speculators
have
been
attempting
to
“buy
the
dip,”
with
significant
long
open
interest
on
BTC
perpetuals.

Speculative
Outlook

Bitfinex
Alpha
cautions
that
a
15-20
percent
decline
could
be
expected
when
rates
are
cut
this
month,
with
a
possible
bottom
of
$40-50k
for
BTC.
This
prediction
is
based
on
historical
data
showing
that
the
cycle
peak
in
terms
of
percentage
return
reduces
by
around
60-70
percent
each
cycle,
and
the
average
bull
market
correction
has
also
diminished.
However,
this
outlook
could
change
if
macroeconomic
conditions
shift.

Historical
Volatility
and
Correlation
with
Traditional
Markets

Historically,
September
has
been
a
volatile
month
for
Bitcoin,
with
an
average
return
of
-4.78
percent
and
a
typical
peak-to-trough
decline
of
around
24.6
percent.
This
volatility,
combined
with
the
potential
for
a
“sell-the-news”
reaction
after
a
rate
cut,
could
present
both
risks
and
opportunities
for
traders.
Bitcoin’s
increasing
correlation
with
traditional
risk
assets
like
the
S&P
500
suggests
its
price
movements
will
remain
closely
tied
to
global
macroeconomic
conditions.

Global
Economic
Factors

Actions
by
other
major
central
banks,
such
as
the
ECB’s
potential
pause
in
rate
hikes
amid
slowing
growth,
the
BOJ’s
cautious
approach
amidst
a
slowly
recovering
economy,
and
the
PBOC’s
targeted
liquidity
measures
to
support
China’s
slowing
growth,
are
likely
to
have
ripple
effects
across
global
markets
and
influence
digital
assets
like
Bitcoin.

The
US
economy
continues
to
benefit
from
ongoing
disinflation,
robust
household
consumption,
and
wage
growth
that
outpaces
inflation.
The
Federal
Reserve’s
preferred
inflation
measure,
the
PCE
index,
increased
by
2.5
percent
in
July,
indicating
sustained
disinflation
and
reinforcing
price
stability
across
the
economy.
Earlier
fears
of
a
potential
economic
slowdown
have
eased,
supported
by
stronger-than-expected
GDP
growth
in
the
second
quarter,
which
was
revised
upward
to
a
three
percent
annual
rate
from
the
previous
estimate
of
2.8
percent.

Housing
Market
and
Consumer
Confidence

However,
the
housing
market
faced
challenges
in
July,
with
pending
home
sales
hitting
a
record
low
as
declining
mortgage
rates
failed
to
stimulate
market
activity.
Despite
this
setback,
there
is
optimism
that
the
downturn
will
be
temporary,
with
expectations
that
further
declines
in
mortgage
rates
and
the
conclusion
of
the
election
year
could
help
the
market
regain
momentum.
Meanwhile,
US
consumer
confidence
reached
a
six-month
high
in
August,
driven
by
optimism
about
the
overall
economic
outlook,
although
concerns
about
the
job
market
still
linger.

Political
and
Regulatory
Engagement
in
Cryptocurrency

Across
the
cryptocurrency
industry,
there
is
a
growing
trend
of
political
and
regulatory
engagement,
alongside
significant
advancements
in
trading
infrastructure
and
market
adoption.
Presidential
candidate
Donald
Trump
has
announced
a
strategy
aimed
at
positioning
the
US
as
a
global
leader
in
cryptocurrency,
specifically
through
his
association
with
the
decentralized
finance
project,
World
Liberty
Financial.

In
tandem
with
this
political
shift,
the
24X
National
Exchange
has
filed
a
proposal
with
US
regulators
to
launch
a
securities
exchange
that
would
allow
for
24/7
trading
of
cryptocurrency
ETFs.
Meanwhile,
Australia
has
emerged
as
a
major
player
in
the
global
cryptocurrency
market,
experiencing
a
17-fold
increase
in
cryptocurrency
ATMs
over
the
past
two
years,
making
it
the
third-largest
market
worldwide.
However,
this
rapid
expansion
has
also
raised
concerns
among
authorities
about
the
potential
use
of
these
ATMs
for
money
laundering.
In
response,
a
multi-agency
task
force
has
been
established
to
address
these
issues,
underscoring
the
ongoing
tension
between
innovation
and





regulation
in
the
cryptocurrency
landscape.

Image
source:
Shutterstock