Fed Rate Decision Could Trigger Brief Bitcoin Boost Followed by Correction

Analysts are closely watching the U.S. Federal Reserve's upcoming interest rate decision, which they believe could lead to short-term volatility for Bitcoin. A potential rate cut in mid-September is expected to initially boost Bitcoin's price, with Bitfinex analysts predicting that a 25-basis-point cut might signal the start of an easing cycle. However, a more significant 50-basis-point cut could cause an immediate spike in Bitcoin's price, followed by a correction as recession fears take hold.

Recessionary indicators, such as the Sahm Rule and the inverted U.S. Treasuries yield curve, are causing concern among economists, with the latter suggesting a 50% chance of a recession within the next 12 months. Bitfinex analysts warn that if these indicators impact risk assets, Bitcoin could see a decline of up to 20% from its current value, potentially bottoming out between $40,000 and $50,000.

This outlook aligns with predictions from BRN analyst Valentin Fournier, who expects major cryptocurrencies to drop by an average of 4.35% in September. Historical trends also show that the stock market often reacts to rate cuts with brief sell-offs, which could similarly affect Bitcoin given its increasing correlation with traditional risk assets like the S&P 500.

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