Will a FOMC Rate Cut Propel Bitcoin or Lead Market Turbulence?

• FOMC rate cut expected to impact Bitcoin and overall crypto market.
• Peter Schiff doubts rate cuts will benefit Bitcoin; inflation risks noted.

The Federal Open Market Committee (FOMC) begins its meeting today, with a decision on interest rates expected to significantly influence market dynamics. The prevailing speculation is that the US Federal Reserve will announce a rate cut after the two-day event, potentially impacting Bitcoin and the broader crypto market.

Historically, interest rate cuts have been bullish for Bitcoin, as reduced borrowing costs typically increase liquidity, fostering investment in risk assets like cryptocurrencies. However, renowned economist Peter Schiff casts doubt on this scenario. Schiff argues that a rate cut might not benefit Bitcoin as anticipated. 

He suggests that the rate cuts could fail to lower rates for most borrowers and that the Fed might resort to Quantitative Easing (QE) to combat rising rates, potentially exacerbating inflation and undermining the dollar. Such developments could negatively affect Bitcoin’s price.

Meanwhile, market expectations are divided. Some Wall Street giants, including JPMorgan, advocate for a 50 basis points (bps) rate cut, citing potential market volatility. Conversely, Goldman Sachs and JPMorgan predict a more modest 25 bps cut. Analysts from JPMorgan foresee a 50 bps reduction, despite concerns about recession and inflation, while Goldman Sachs anticipates a minor near-term setback for gold, with a longer-term boost for gold ETFs.

Will Bitcoin Go Up or Down?

The CME FedWatch tool indicates a 69% probability of a 50 bps rate cut, with a 31% chance of a 25 bps reduction. A 50 bps cut could trigger significant market activity and volatility, potentially driving Bitcoin prices higher but with increased risk.

As Bitcoin remains in a sideways trend amid the FOMC meeting, market observers, including crypto analyst Ali Martinez, warn of potential instability. The decision on September 18 could either propel Bitcoin prices or lead to panic selling, depending on the Fed’s actions and broader market sentiment.

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