We all know Bitcoin is a volatile asset, but according to Bitfinex analysts, we might be in for an especially bumpy ride soon. On Wednesday, the U.S. Federal Reserve is set to announce its latest interest rate decision, and Bitfinex suggests that this could shake up the financial markets quite a bit.
Depending on what the Fed decides, we could see some big swings in Bitcoin. Bitfinex has pointed out that the outcome of the rate decision will play a huge role in what happens next, but they aren’t being too specific.
Interest Rate Cuts: What They Could Mean for Bitcoin
Bitfinex analysts explain that the difference between a 0.25% and a 0.50% rate cut could flip the mood in the market—from feeling bullish to something much less positive. However, they don’t clearly say which cut will lead to which outcome, keeping us guessing a bit.
The broader state of the U.S. economy will also have a big impact. Ideally, a 0.50% rate cut would be the best-case scenario for Bitcoin, but only if it doesn’t push the U.S. into a recession. If that happens, the usual positive effects of a rate cut could be overshadowed, as recessions typically don’t pair well with bull markets.
Bitcoin Found Its Bottom at $52,000?
The Bitfinex team also believes that Bitcoin might have found its local bottom at $52,000. They point to the dip on September 6, when Bitcoin dropped to $52,756, as the turning point. Since then, the price has bounced back by over 15%, helped by a reignited appetite in Bitcoin ETFs, which pulled in $403.9 million just last week and already $200 million after Tuesday this week.
Rate Cut Predictions: Market Is Split
When it comes to Wednesday’s rate cut, the market seems to be split. Data from the CME Group shows that there’s currently a 67% chance of a 0.50% rate cut and a 33% chance of a 0.25% cut. However, Bitfinex is betting on a smaller cut of 0.25%, mainly due to ongoing concerns about inflation. They expect the Fed to tread carefully, knowing that cutting rates too much could trigger another round of inflation—something the Fed will want to avoid at all costs.