As Bitcoin Booms Once Again, Here’s How US Fed Rate Cuts Can Supplement Crypto’s Future

While there is considerable data available in the public domain to understand this concern, what needs to be considered is Bitcoin’s unregulated and often unpredictable nature.

By Roshan Aslam

As the US Federal Reserve chair announced a 50 bps rate cut for the first time since 2020, the global Bitcoin market witnessed upward momentum. In recent months, Bitcoin has struggled to retain its position above the $60,000 level, causing it to test support levels around $55,000 multiple times. However, the rate cut announcement by the US central bank was perceived positively by global investors, causing it to rise over $61,000.

However, deeper analysis suggests that the rate cut announcement is far from a stationary announcement, but a multidimensional one. Widespread speculation ahead of the rate cut announcement indicated that a minimal 25 bps rate cut was expected.

The doubled expectation can be interpreted that the inflation situation is different than what has been communicated by the officials so far, and coupled with another rate cut in December the belief only gathers steam. In general, this development can prove to be the driving force to help Bitcoin reach new all-time highs in the long term but it will depend on several external factors, whales, institutional and retail investors. Similar to opportunities, this aggressive rate cut may also lead to probable short-term risks, but the sentiments remain bullish and any uncertainties are yet to be determined.

Aggressive Rate Cut: Positive Or Negative?

There has been a clear division among Bitcoin investors on how to interpret the aggressive 50 bps rate cut. Some believe that the central bank’s policy adjustment is focused on mitigating the looming crisis, whereas others think that this shows the federal body’s commitment to providing relief. It does not change the fact that the Federal Reserve in the last few years has shown aggressiveness to reduce inflation. However, a portion of Bitcoin market constituents are becoming anxious over concerns regarding the recession, an aspect that will have an increasingly adverse effect on the future of the world’s largest cryptocurrency. 

While there is considerable data available in the public domain to understand this concern, what needs to be considered is Bitcoin’s unregulated and often unpredictable nature. Historically, Bitcoin has flourished under economic stress and has become a unique hedge against inflation. But investors are correctly pointing out that the nature of the rate cut remains non-stationary, as the Federal Reserve has discovered a more complex reality looming around the horizon, which may introduce more volatility in the crypto market. 

Future Of Bitcoin

The future of Bitcoin cannot be predicted in a comprehensive general answer. The rate cut offers ambiguous communication for both short and long-term investments. However, it may be considered that rate cuts have had a positive impact on cryptocurrencies. However, the nature of the rate cut may be a damage control move from the US Federal Reserve and if the broader market constituents interpret it as such, a significant sell-off might be in the works shortly. 

Presently, Bitcoin is being traded at $62,092 at the time of writing this opinion, with a resistance level of $62,600. If BTC manages to break the resistance level, it may adopt a bullish momentum with a target price of $64,935. However, it will depend on several factors, especially participation from institutional investors. 

While the next few months are significant to shape Bitcoin’s future, the long-term view remains positive. The economic intervention from central banks in the US, Europe and the rest of the world supplement Bitcoin’s fundamentals. Coupled with increasing retail and state (such as the Kingdom of Bhutan) participation, Bitcoin is gradually becoming a crucial monetary alternative to accumulate wealth. This sentiment will help Bitcoin to rise over its previous all-time highs in the coming years.

Engineering Global Economic Transformation

Economic slowdowns around the world are becoming a concern for central banks. As a response, these organisations are trying to intensify inflation-reducing measures and optimise currency supply. Considering Bitcoin’s nature to flourish under economic stress, central banks are increasingly deciding to adopt these virtual digital assets in their comprehensive strategies. 

As national economies remain dependent on economic intervention, Bitcoin’s unregulated nature also supplements wealth-generating and accumulating aspirations which is further strengthening BTC’s long-term positioning. However, it is imperative that investors understand the next few months will showcase increased volatility in the cryptocurrency sphere, and Bitcoin’s resilience will not be enough to not subject investors to this period of uncertainty. 

(The author is the Co-founder and CEO of GoSats)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.