In a note to clients on September 9th, 10x Research CEO Markus Thielen warned that an aggressive U.S. Federal Reserve rate cut could signal economic worry rather than reassurance, dampening Bitcoin and other risk assets. While a 25 basis point cut may lead to long-term price appreciation for Bitcoin as liquidity increases and recession fears ease, a more aggressive cut of 50 basis points could signal deeper concerns to the markets. This could cause investors to reduce their exposure to risk assets like Bitcoin. Traders currently place the probability of a 50 basis point cut at 29%, but 10x Research cautions against this, citing it as contrasting their view of the prevailing consensus.
Recession concerns have been growing following weak U.S. jobs data in August, with the Sahm Rule Recession Indicator jumping to 0.53. In the wake of August’s weak jobs report, the indicator has risen even higher to 0.57, leading to fears of a looming recession. However, not all analysts share the same concerns. Alianza advisor and former Pimco CEO Mohamed El-Erian believes that the U.S. economy will avoid a recession despite the weak jobs data. The discrepancy in views on the state of the economy contributes to the uncertainty in the markets and the impact it could have on assets like Bitcoin.
A report from Bitfinex on September 2nd warned that a U.S. rate cut could present a challenging time for Bitcoin traders. Analysts at Bitfinex cautioned that a 50 basis point rate cut could trigger a correction in Bitcoin’s price, pushing it further into a recent slump as recession concerns escalate. They speculated that a 15-20 percent decline in Bitcoin price could occur when rates are cut this month, with a potential bottom at $40-50k for BTC. However, some analysts still see a bullish case for Bitcoin, with the low 40,000s identified as an optimal entry point for the next bull market.
Despite short-term challenges for Bitcoin, some analysts still believe that a six-figure Bitcoin price is within reach. Popular trader Titan of Crypto pointed to the final quarter of the year as a potential breakout point, describing it as having epic potential for price action. This sentiment is shared by other analysts who see a potential for significant price movement in the near future. The uncertainty surrounding the markets and the impact of a U.S. rate cut on Bitcoin makes it a high-risk asset class, with investors advised to proceed with caution and conduct their own research before making investment decisions.
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