There has been much speculation surrounding potential interest rate cuts by the U.S. central bank in September or November. Analyst ‘RamenPanda’ predicts that there will be no sharp correction following these cuts. He points out that historically, during times of financial crisis, such as in 2008, the Fed has cut rates to stabilize the economy. However, this has not always resulted in positive outcomes, with markets often faring worse and stocks falling following the cuts.
Another scenario highlighted by the analyst is when the Fed cuts rates even when the economy is doing well but rates are perceived to be too high. Currently, rates are at 5.25% to 5.5%, where they have remained for the past year. RamenPanda believes that this uncommon scenario is the main driver behind the expected rate cuts this year. He draws parallels to the boom experienced in 1995 when the Fed cut rates, sparking the dot com bubble in the following years. This time, he predicts a similar boom, particularly in crypto and AI-related assets.
It has been noted that BTC market movements are often correlated with U.S. inflation data and Consumer Price Index (CPI) reports. These factors heavily influence Fed policy and decisions regarding interest rates. Analyst Willy Woo suggests that assets like gold, stocks, and Bitcoin can be a hedge against CPI and monetary debasement. Despite the potential for significant gains, there may be short-term pain ahead.
Head of research at 10x Research, Markus Thielen, has offered a cautious prediction regarding BTC, suggesting that it could fall to $55,000 during the correction. He pointed out that weekly and monthly reversal indicators are signaling a broader correction. BTC recently retraced 19% from its all-time high, dipping below $60,000. However, it has not yet reached the current cycle average correction of around 22%, which would translate to a fall to $57,500. If Thielen’s prediction materializes, the correction could be even deeper, reaching 25% or potentially 32% if it plummets to $50,000.
The future of interest rates and Bitcoin remains uncertain, with analysts offering varying predictions and insights. The potential rate cuts by the Fed could lead to significant market movements, particularly in the crypto and AI sectors. It is essential for investors to stay informed and cautious in navigating these volatile markets.
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