What to know:
- BTC pops and drops, making a quick retreat from $106.5K.
- The Fed is likely to deliver a “hawkish rate cut,” with hints of less easing next year.
As an analyst with over two decades of experience in the financial markets, I have witnessed numerous cycles of interest rate cuts and their impact on various asset classes. In this context, the upcoming Fed rate cut presents a complex picture for Bitcoin (BTC).
Bitcoin (BTC) surged to over $106,000 in early Asian hours, setting new all-time highs before quickly retreating to $104,500 amid concerns about the upcoming U.S. Federal Reserve (Fed) rate cut.
It’s predicted that the Federal Reserve will lower its key lending rate by a quarter of a percent, bringing it within the 4.25% – 4.5% range. This represents a decrease of 100 basis points since September. However, there are worries that the Fed’s accompanying statements might try to dampen expectations for additional reductions, which could lessen the positive impact of the rate cut on the market.
On December 18th at 2:00 PM ET, I eagerly await the Federal Reserve’s rate decision, which includes their interest rate projections and economic forecasts. Following this announcement, I look forward to hearing from Fed Chair Jerome Powell during his press conference, scheduled for a half hour later.
A plot previously published on September 18 indicated a projected reduction of 2.5 percentage points in interest rates by the end of 2026, lowering borrowing costs under 3%. Certain analysts speculate that the Federal Reserve may adjust these projections downward during their meeting on Wednesday.
“Marc Chandler, a strategic analyst at Bannockburn Global Forex, stated in his recent newsletter that it is being proposed to make fewer increases in interest rates next year compared to what was initially anticipated in September. This suggestion comes from acknowledging that the economy is stronger than previously expected and that inflation is experiencing some ups and downs, giving the Federal Reserve room to act more cautiously.
If the predictions indicate a reduced pace or number of interest rate decreases, U.S. Treasury bond yields and the U.S. dollar might continue their current upward trend. This could make it more challenging for risk-related assets such as Bitcoin to maintain their recent strong demand.
In simpler terms, it seems that Bitcoin tends to do well during different seasons, and since President-elect Trump appears supportive of cryptocurrencies, even a potentially strict Federal Reserve might not significantly affect Bitcoin in the long term.
Additionally, if the Federal Reserve maintains the possibility of interest rate reductions and China is also anticipated to ease its monetary policy, Bitcoin’s optimistic outlook will continue to hold strong.
Although there may be much discussion about how deep future reductions will be, it’s important to note the overall positive influence of a worldwide trend of central banks lowering interest rates and an increase in global funds availability. This trend, which is expected to be driven by China, should continue.” – LondonCryptoClub founders.
This week’s latter part will unveil the most recent Core PCE data, a measure favored by the Fed for assessing inflation, helping us determine if the recent increases in consumer prices are merely temporary spikes or signs pointing towards a true revival of inflation.
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2024-12-16 08:10