It has been just revealed the fact that the Fed rate cuts could affect Bitcoin, and below, you can find out exactly how. Check out the latest reports about the matter.
Fed rate cuts could affect Bitcoin
A popular cryptocurrency analyst has cautioned that a potential interest rate cut by the US Federal
Reserve might not result in a bullish Bitcoin (BTC) market. In a recent video update, Benjamin Cowen, a crypto trader with over 787,000 YouTube subscribers, explains that historical trends indicate that a Fed rate cut may lead to a downward trend for both the S&P 500 (SPX) and Bitcoin.
“With the S&P 500 going higher as rates were going higher [between 2016-2018], so, too, Bitcoin was going higher as rates were going higher.”
He continued and said the following:
“Now, what you’ll notice last cycle is that at this [December 2018 BTC] bottom it actually corresponded to the Fed pausing rates, it corresponded to a pause. And the top that came in 2019 occurred before the first rate cut. So the first rate cut was in July [2019]. You can see it right here. So this cut, you can see that Bitcoin topped out before the first rate cut.”
According to the trader, in 2000 and 2007, when rate cuts began, the S&P 500 had already hit the market tops.
This might seem counterintuitive, as rate cuts usually imply looser monetary policy and, thus, a positive outlook for risk assets.
However, historical data on the S&P 500 shows that rate cuts typically coincide with a decline in the market’s performance.
In 2007, rate cuts started right when the market peaked, while in 2000, the market had already topped before rate cuts began.
He also said, as reported by the online publication the Daily Hodl, that the S&P 500 and BTC will surge only after the Fed is near the end of its rate-cutting process.
“So when rate cuts start, it doesn’t tend to translate to an immediately bullish market, because oftentimes the reason the Fed is cutting rates is because they’re trying to compensate for perhaps keeping rates tight for too long and now the market is screaming for help. Normally, the first few rate cuts that the Fed does are not enough to turn the economy around. And again, the market will tend to bottom out close to the last rate cut.”
Over the past weeks, there have been a lot of optimistic predicitons about the price of Bitcoin and this was mostly due to the much-awaited acceptance of BTC ETF.
