FBS analysts project a looming downturn for Bitcoin as the market players await the upcoming Federal Reserve’s key rate cut in 2024. This tendency signals the rising probability of the BTCUSD’s closing bullish trend as rate hikes frequently influence risk assets such as Bitcoin.
The Federal Reserve’s key rate, a pivotal factor determining the minimum interest rate for interbank lending, plays a substantial role in shaping the financial landscape and market participants have observed a correlation between the Federal Reserve’s key rate peaks and the decline of risk assets such as Bitcoin.
As FBS analysts review Bitcoin’s behaviour from 2017 to 2020, they point out a remarkable 370% surge in early 2019 to $13 000 or the 61.8 Fibonacci level following public anticipation of the rate cuts. However, the trend reversed as the rates started declining, leading to bearish BTCUSD.
The 2021 to 2024 scenario witnessed the Federal Reserve’s increasing interest rates to combat inflation. Despite initial expectations of such rate hikes dampening the demand for risk assets, Bitcoin’s value surprisingly increased. The market dynamics shifted following the Fed’s announcement of a pause in rate hikes in September 2023 with markets pricing in an upcoming rate decline.
Looking at the 2024 financial market trends, FBS analysts point out the striking similarities with Bitcoin’s 2017 to 2020 pattern. They mainly highlight that BTCUSD reached the 61.8 Fibonacci level at around $49 000 and subsequently bounced off, coinciding with market expectations of the potential rate cut by the Federal Reserve.
Considering substantial parallels with the past, FBS analysts anticipate a decline in Bitcoin’s price towards the $36 000 target after the first Fed rate cut in 2024. Moreover, if BTCUSD loses this support, it may drop to $31 000 and even $25 000 support levels.
This scenario underscores a crucial aspect often overlooked in market cycles. While there is anticipation that a key rate cut will positively impact prices of risky assets like Bitcoin, it is imperative to recognise the fundamental factor that such cuts typically occur in the face of economic stagnation and decelerating growth prompting panic selling and the disposal of risky assets.