The highly anticipated September Federal Reserve meeting is scheduled to occur this week from September 17 to 18. Speculations are rife that the US Federal Reserve will make an announcement regarding a potential interest rate reduction during its press conference on September 18. Market indicators currently suggest that the Fed may opt for a rate cut of either 25 or 50 basis points (bps), a decision that could have a significant impact on Bitcoin and other cryptocurrencies.
The probability of a 50 bps Fed rate cut stands at 59%, according to the CME FedWatch data, with a 41% chance of a 25 bps rate cut at the upcoming meeting. Similarly, recent data from Polymarket reflects a 55% likelihood of a 50 bps rate reduction and a 43% chance of a 25 bps cut.
Initially, expectations favored a 25 bps rate cut over a 50 bps one until the release of the PPI inflation data, which indicated improvements in the US economy, hinting at the potential for more substantial rate cuts.
This impending interest rate adjustment would mark the first such action by the Fed since March 2020, with the crypto community closely observing the situation owing to its expected impact on Bitcoin’s price and the broader crypto market. Previous trends suggest that BTC tends to benefit from rate cuts, as evidenced by the 2021 bull run that followed the rate cut in March 2020, propelling Bitcoin to approximately $69,000.
Looking ahead to the aftermath of a Fed rate cut, crypto analyst Doctor Profit anticipates downward pressure on Bitcoin’s price. Factors such as the Israel-Lebanon conflict could amplify market fears, potentially driving BTC prices even lower. Amidst the anticipated volatility post-rate cut, Doctor Profit advises market participants to prioritize effective risk management to safeguard their capital during these uncertain times.
Despite short-term challenges, Doctor Profit remains optimistic about Bitcoin’s medium and long-term prospects post-rate cut. He foresees the influx of liquidity into the crypto market due to the anticipated Quantitative Easing (QE) and the increased issuance of USDT on-chain. Furthermore, he hints at the liquidity injection expected from FTX creditors, set to receive repayments starting in Q4 of this year.
The analyst suggests that the money printers will be activated following the conclusion of interest rate adjustments by Fed Chair Jerome Powell and the committee. Recent forecasts by Citi analysts projecting a 1.25% Fed rate cut post the August CPI inflation data hint at the likelihood of further rate cuts after the September Fed meeting.