FOMC Meeting Begins Today: Why Bitcoin Might Not Benefit From Rate Cuts

The FOMC meeting begins today, and the US Federal Reserve is expected to announce an interest rate cut after the two-day event. A Fed rate cut is historically bullish for Bitcoin and the crypto market, with prices likely to rise. However, renowned economist Peter Schiff has suggested that Bitcoin might not benefit from any rate cut this time.

FOMC Meeting Starts Today, But Rate Cuts Might Not Be Bullish For Bitcoin

Peter Schiff suggested in an X post that the rate cuts might not be bullish for Bitcoin as the FOMC meeting begins today. He claimed that it is unlikely that the upcoming rate cuts will lower interest rates for most borrowers. The economist gave an instance of how mortgage rates are likely already bottomed and are headed higher.

Meanwhile, Schiff remarked that the Fed will likely return to Quantitative easing (QE) to stop rising rates but asserted that this will only crush the dollar and reignite inflation. If this plays out as the economist predicts, it could negatively impact the Bitcoin price.

The BTC price is expected to react positively to an interest rate cut because it would allow more liquidity to flow into the Bitcoin ecosystem. However, based on Peter Schiff’s prediction, borrowers may not necessarily enjoy lower rates, meaning the injection of liquidity into BTC might not happen as expected.

Moreover, the US economy suffering from rising inflation again doesn’t bode well for Bitcoin, especially considering how the BTC price has reacted to several macroeconomic factors since the start of this year. Rising inflation will diminish investors’ confidence in investing in risk assets like the flagship crypto.

Interstingly, Peter Schiff warned that Bitcoin price could drop to as low as $20,000 soon enough. The economist, who has always advocated for Gold over BTC, highlighted a triple top on the crypto’s price chart, while explaining what could prompt this Bitcoin crash.

A 75 Bps US Fed Rate Cut Now On The Cards

Ahead of the FOMC meeting, Senator Elizabeth Warren and two other Democratic have urged the Federal Reserve Chair Jerome Powel to slash interest rates by 75 basis points (bps) to protect the US economy. While it remains to be seen if the Fed will heed this call, it brings a new perspective. Before now, the major forecasts have been that the US Central Bank will slash rates by 25 or 50 bps.

For now, the market seems to be tilting toward 50 bps, as CME FedWatch data shows that the chances of a 50 bps have surged to 65%, while the odds for a 25 bps have dropped to 35%. Some analysts argued that the US inflation hasn’t cooled off to a point where the Fed can afford to cut rates by 50 bps.

In line with this, investment banks Goldman Sachs and JPMorgan predict a 25 bps US Fed rate cut. After this macro decision, they expect that assets like Gold will dip in the short term.

Popular crypto analyst Lark Davis also expects a lot of short-term volatility, which could cause Bitcoin price to decline following the FOMC meeting. However, he is bullish on BTC’s outlook in the long term.

A 25bps rate cut is BULLISH

A 50bps rate cut is also BULLISH

Yes, there could be some volatility in the short-term

But in the long term, it’s all mega bullish.

— Lark Davis (@TheCryptoLark) September 16, 2024