Source: Bitfinex; Compiled by: Baishui, Jinse Finance
This month’s U.S. interest rate decision will have a significant impact on Bitcoin’s short-term volatility and long-term trend. Bitcoin has risen more than 32% since the beginning of August as traders anticipate dovish comments from the Federal Reserve. A 25 basis point rate cut could signal the start of a classic easing cycle, which could lead to long-term price gains for Bitcoin as liquidity increases and recession fears ease. On the other hand, a more aggressive 50 basis point rate cut could result in an immediate price surge, but this could be followed by a pullback as recession fears intensify. Over the past week, we have seen spot holders reduce risk while perpetual market speculators attempt to “buy the dip,” and we continue to observe large long open interest in BTC perpetual contracts.
If we were to speculate, we would cautiously expect a 15-20% drop in the price of Bitcoin following this month's rate cut, with a minimum drop of $40-50,000. This is not an arbitrary number, but is based on the fact that cycle peaks (in percentage returns) fall by about 60-70% per cycle, and the average bull market correction is smaller. But this logic could easily be negated if macroeconomic conditions change. These are uncertain times for traders.
September has historically been a volatile month for Bitcoin, with an average return of -4.78% and a typical peak-to-trough draw of about 24.6%. This volatility, combined with the potential for a “sell the news” reaction following a rate cut, could present both risks and opportunities for traders. Meanwhile, Bitcoin’s growing correlation with traditional risk assets like the S&P 500 suggests its price action will remain closely tied to global macroeconomic conditions. Actions by other major central banks, such as the ECB’s potential pause in rate hikes amid slowing growth, the Bank of Japan’s cautious approach amid a slow economic recovery, and the People’s Bank of China’s targeted liquidity measures to support China’s slowing growth, could have ripple effects on global markets and impact digital assets like Bitcoin.
The U.S. economy continues to benefit from persistent deflation, strong household consumption and wage growth that outpaces inflation. The Federal Reserve's preferred inflation measure, the personal consumption expenditures index (PCE), rose 2.5% in July, indicating that deflation persisted and reinforcing price stability across the economy. Earlier concerns that the economy might slow were eased thanks to stronger-than-expected GDP growth in the second quarter, which was revised up to a 3% annual rate from a previous estimate of 2.8%.
However, the housing market faced challenges in July, with pending home sales hitting a record low, as lower mortgage rates failed to stimulate market activity. Despite the setback, we remain optimistic that the economic downturn will be temporary, and we expect further declines in mortgage rates and the end of the election year could help the market regain momentum. Meanwhile, U.S. consumer confidence reached its highest level in six months in August, helped by optimism about the overall economic outlook, although concerns about the job market remain.
Across the cryptocurrency industry, we’ve also seen growing political and regulatory engagement, along with significant progress in trading infrastructure and market adoption. Presidential candidate Donald Trump announced a strategy to position the United States as a global leader in cryptocurrency, specifically through his partnership with decentralized finance project World Liberty Financial.
Following this political shift, 24X National Exchange has submitted a proposal to U.S. regulators for a stock exchange that would allow 24/7 trading of cryptocurrency ETFs. Meanwhile, Australia has emerged as a major player in the global cryptocurrency market, with the number of cryptocurrency ATMs growing 17-fold over the past two years, making it the world’s third-largest market. However, this rapid expansion has also raised concerns among authorities that these ATMs could be used for money laundering. In response, a multi-agency task force has been formed to address these concerns, highlighting the ongoing tension between innovation and regulation in the cryptocurrency space.
Wish you a happy trading！
