Bitcoin reacts little, but then rises

Yesterday, after the Fed cut interest rates, the price of Bitcoin reacted timidly to the news. After that, with the opening of the Asian markets, it rose. 

Fed: the interest rate cut and the impact on the price of Bitcoin

Yesterday, the Fed cut interest rates by 50 basis points (the minimum cut is 25), just as the markets expected. 

It had started to increase them in March 2022, due to the strong rise in inflation, and had increased them until July of last year, when they reached the highest levels of the last 20 years. 

For more than a year, he has left them unchanged at very high levels, although many in July of this year were already expecting a first cut of 25 basis points. In fact, yesterday at the press conference, the Fed chairman, Jerome Powell, admitted that if they had known what would happen to the labor market in August, they probably would have cut them already in July, by 25 points. 

The markets had in fact bet on a 50-point cut yesterday, instead of 25, and this bet paid off. However, after an initial moment of euphoria for the accurate prediction, there was a moment of downturn due to the scenario described by the Fed in the document that accompanied the news of the cut. 

In fact, the markets were expecting about ten cuts from now until the end of 2025, but that document foresees just over half of that. So if at first the markets had reacted well, in a second moment the euphoria had partially dissipated. 

The press conference of Powell

Half an hour later, the President of the Fed started to speak. 

Powell reassured by saying that the scenario of cuts described in the document was not to be considered a forecast, but only an estimate based on the current situation and information.

In other words, he indicated that other more optimistic scenarios cannot be ruled out, in case the situation evolves further and the new data available in the coming months puts the Fed in a position to cut rates more than anticipated yesterday. 

Moreover, Powell also ruled out that there are signs of a possible recession in the USA, and he also dampened many negative hypotheses regarding the current US labor market. 

The picture described by Powell was in all respects good, with only a few small exceptions. 

However, the American markets have not been easily convinced by his words, remaining cautious for now. 

The rise of Bitcoin after the Fed’s interest rate cut

Before the publication of the news about the rate cut, the price of BTC was just below $60,000. 

As soon as the news was published, it rose to 61,000$, but after a careful reading of the document with future prospects, the price returned to just above 60,000$. 

The US stock markets yesterday ended up closing the session in slightly negative territory, so much so that the price of Bitcoin had fallen back below $60,000 at that time.

During the night, however, at the reopening of the Asian stock exchanges, the markets reacted positively. 

Today even the Hang Seng index of the Hong Kong stock exchange is showing an excellent +2% daily, as well as the Japanese Nikkei. 

This rise has also dragged with it the price of Bitcoin, which has even risen above $62,000.

The rise of Asian stock markets probably combined with a sort of delayed reaction to Powell’s words yesterday, given that although they were clearly positive overall, they did not convince the markets immediately. 

The reaction of today

To tell the truth, for days the hypothesis has been circulating that September 18 was not the right day for a reaction in the price of Bitcoin, but today, that is, the 19th. 

The markets indeed follow cycles that are due both to their inevitable seasonality and to human behavior, which in many cases is influenced, for example, by the climate. 

In fact, September is often a difficult month, because for reasons related to market seasonality it tends to be a month with low liquidity in the markets. 

Instead, on the contrary, October often turns out to be a positive month, so much so that it is sometimes nicknamed “uptober”. 

The markets know these dynamics very well, as they have been ongoing for decades, and always try to anticipate them. So it is not at all strange that with the approach of October, the buying pressure, especially on risk-on assets, tends to rise a bit. 

Furthermore, the markets also know very well that in all three previous cases after the presidential elections in the USA, the price of Bitcoin entered a bullrun lasting about 12 months, also thanks to the halving that always occurred in the same years as the elections (2012, 2016, and 2020). 

Given that this year there was also a halving, and since the elections in the USA will be held on November 5th, many are convinced that history could repeat itself. There are no certainties, of course, but the probabilities seem good, at least in theory.