Bitcoin (BTC) Price Prediction: Why the Market Could Be Wrong About a September Rate Cut From the Fed

The Federal Reserve's Open Market Committee (FOMC) statement on 31 July noted that inflation had eased in recent months. Even so, it remained elevated and targeted a federal funds rate of 5.25%-5.5%.

The Federal Reserve’s Open Market Committee (FOMC) statement on 31 July noted that inflation had eased in recent months. Even so, it remained elevated and targeted a federal funds rate of 5.25%-5.5%. This largely ruled out the possibility of a major Fed rate cut in September.

The likelihood of such a cut affected traditional equities and saw Bitcoin (BTC) begin its freefall toward the $49k mark. The Japanese Yen carry trade brought in talk of a significant rate cut to combat recession risks.

Such a cut can be beneficial for risk-on assets like Bitcoin. In fact, an uptick in global liquidity might spark the next bull run. The target rate probabilities revealed that a majority of the market anticipates a 25 basis point rate cut in September.

However, an equity analyst warned that the market could be making a mistake by pricing in a 100% Fed rate cut for September. Speaking to a financial news outlet, Justin Elliot, portfolio manager at Caldwell Investment Management, said,

“The market pricing in a 100 basis points of cuts by the end of the year is a potential risk. The economy is still holding up fairly well, retail sales are fairly strong, unemployment is still rising but low on a historical basis.”

This could see estimate cuts as the year goes on, he added. This perspective may help ground the more enthusiastic market participants that BTC is not likely heading to the moon in Q4 2024 and Q1 2025 on the back of the Fed rate cuts.

The short-term liquidity chart revealed that toward the south, $57.4k was the immediate target, with $55k another likely target. To the north, the $62k-$63k zone was also an attractive liquidity zone.

On the contrary, the 1-year lookback chart highlighted how key the $51.2k zone was. A sweep of this level was followed by a swift bounce.

Here, it’s worth noting that the strong band of liquidation levels above $70k is not under immediate threat. This, because of the bearish structure of Bitcoin on the weekly chart.

It has formed two lower lows since April. The plunge to $49k on 5 August was quickly reversed, but the bearish trend remained. A weekly trading session close above $70k is required to shift the trend, and this might not happen in the next month or two. After a sharp retracement, BTC generally requires time to consolidate.

News of a Fed rate cut in September and November might see a trend shift begin. However, as things stand, Bitcoin does not yet appear ready to break out past $70k.

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