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Bitcoin Faces High Volatility Amid Rate Cuts, Analysts Predict Potential Sell-Off
- Bitcoin has rallied as much as 15% since hitting its weekly low of US $52k, thanks to increasing buy orders on spot exchanges.
- A report from Bitfinex suggests that volatility may rock the markets over the next week, driven largely by the US Federal Reserve’s rate cuts.
- More conservative rate cuts may cause a sell-off – however, an aggressive decision could prompt a breakout from Bitcoin’s US $61k ceiling.
- Macroeconomic conditions are poised to play a major role in Bitcoin’s price to end 2024.
It’s been an interesting September for Bitcoin and the rest of the crypto market. Those following the market daily would conclude the coin has struggled for most of the month – but in reality, BTC has recovered strongly since hitting its US $52k (AU $77k) floor a fortnight ago. Bitcoin ETFs are the prime mover here, seeing US $400m (AU $592m) in net inflows in the last seven days alone.
Global exchange Bitfinex has released its September “Alpha” report to analyse where Bitcoin may be headed in the coming weeks.
Related: Last Dip Buying Opportunity? Analysts Predict Bitcoin Will Soar Beyond $90K Soon
Fundamentals Fuel Recovery, But Ceiling Proves Resilient
The report also notes that spot markets have demonstrated an influx in spot buy orders – as opposed to derivatives such as futures and perpetual markets. Bitfinex argues this means the most recent rally is based on fundamental accumulation, rather than speculation.
Unfortunately, Bitcoin has also shown an inability to break through its US $61k (AU $90k) ceiling, leading to a stagnating and ranging price. Bitfinex believes this has been mirrored by a slowdown in the ratio of buy-to-sell orders on central exchanges, as investors adopt a wait-and-see strategy.
Rate Cuts and US Election: Bitcoin to Break Out or Remain Stifled?
The key to the next phase of the Bitcoin cycle will be the US Federal Reserve’s rate cut decision coming this week. Market volatility could be on the cards, according to Bitfinex, as a conservative 25 bps cut from the Feds may lead to a relatively major sell-off.
The report also identifies that BTC has decoupled from gold (which hit a new all-time high), suggesting investors prefer traditional defensive stocks to diversify their portfolios over riskier assets like Bitcoin.
However, Bitfinex also presents a bullish case where the US Federal Reserve, spurred by improving inflation, cut rates by 50 basis points.
Such a move could be the catalyst that sees Bitcoin break out in the coming days, although Bitfinex argues a more moderate 25 bps cut is more likely.
Related: MicroStrategy Invests an Additional $1.11 Billion in Bitcoin
Whether the cut is 25 or 50 basis points, it could sway market sentiment between bullish optimism and cautious de-risking.
Bitfinex Despite the likely volatility coming to finish off September, Bitfinex believes that overall market sentiment has been improving ever since fears of a recession caused a short-term crash back in August.
After a slow couple of months, the outlook for Bitcoin is set to become clearer to end 2024, as the US election comes to a close and the impact of a rate cut hits the market.
Author
Ben Knight
Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.
