FBS analysts are sounding the alarm, predicting a looming downturn for Bitcoin, and it all hinges on the Federal Reserve’s upcoming key rate cut in 2024.
This development hints at the growing likelihood of a bullish trend reversal for BTCUSD, as rate reductions tend to have a profound impact on risk assets like Bitcoin.
The Federal Reserve’s key rate, a linchpin determining the minimum interest rate for interbank lending, wields considerable influence over the financial landscape.
Market observers have noted a recurring pattern where the Federal Reserve’s rate hikes coincide with the decline of risk assets, with Bitcoin being no exception.
Delving into the history of Bitcoin’s behavior from 2017 to 2020, FBS analysts spotlight a significant surge of 370% in early 2019, pushing BTCUSD to the 61.8 Fibonacci level at $13,000, driven by expectations of rate cuts. However, as interest rates began to recede, Bitcoin’s trajectory took a bearish turn.
The period from 2021 to 2024 saw the Federal Reserve implementing interest rate hikes in an effort to combat inflation.
Contrary to initial expectations of these hikes dampening the demand for risk assets, Bitcoin’s value exhibited an unexpected increase.
Market dynamics shifted when the Fed announced a halt to rate hikes in September 2023, with market participants pricing in the likelihood of an impending rate cut.
Analyzing the financial trends of 2024, FBS analysts highlight striking similarities to Bitcoin’s 2017-2020 pattern.
Notably, BTCUSD reached the 61.8 Fibonacci level at approximately $49,000 and subsequently retraced, coinciding with market expectations of the Federal Reserve’s potential rate cut.
Based on these parallels with the past, FBS analysts foresee a decline in Bitcoin’s price, targeting $36,000 after the first Federal Reserve rate cut in 2024.
Furthermore, if BTCUSD breaches this support level, it may plummet to $31,000 and even $25,000 support levels.
This scenario underscores a crucial aspect often overlooked in market cycles.
While there’s anticipation that a key rate cut will positively impact the prices of risky assets like Bitcoin, it is essential to recognize that such cuts typically occur in response to economic stagnation and slowing growth, often triggering panic selling and the disposal of risky assets by investors.