Bitcoin price has retreated 2,3% as the US Federal Reserve prepares to cut interest rates.
According to Bloomberg analysts, the new adjustment in the Federal Reserve's monetary policy, which is expected to take place later this week, has generated nervousness among investors in risky assets, including cryptocurrencies.
On Monday, the price of Bitcoin experienced a significant drop, trading around $58.100 per unit, according to data from CoinMarketCap.
The recent correction in Bitcoin's price comes after a week in which the leading cryptocurrency had registered a 10% increase, making this its biggest weekly rally since July. Analysts highlighted that BTC's recent drop could have been motivated by speculation surrounding a possible rate cut of up to 50 basis points by the Fed.
Analysts anticipate a week full of volatility
Market analysts suggest that cryptocurrency traders are anticipating a significant impact on the bitcoin price due to decisions to be made at the next US monetary policy meeting.
While a rate cut could have a positive impact on the price of the leading cryptocurrency and risk assets, analysts are still unsure of the magnitude of the Fed's move this week, keeping crypto investors on tenterhooks.
Source: CoinMarketCap
Caroline Mauron, co-founder of Orbit Markets, noted that the outlook for upcoming US monetary policy decisions has overshadowed other variables that typically influence Bitcoin's price. “Traders are pricing in significantly more weight than we've seen in recent times for the Fed meeting,” said Mauron tells Bloomberg.
Uncertainty surrounding the magnitude of the interest rate cut and the Fed's future projections have led investors to adopt a more cautious stance. Sean McNulty, chief operating officer at Arbelos Markets, hinted that comments from Federal Reserve Chairman Jerome Powell will be crucial in determining the future direction of the BTC price and other risky assets.
The Fed's Impact on Bitcoin and the Crypto Market
Bloomberg analysts noted that the outlook for U.S. monetary policy has possibly become more tense. The dominant short-term driver in the cryptocurrency market, making the upcoming Federal Reserve meeting a key event that could redefine the crypto market landscape.
If the Fed cuts its interest rates by at least 25 basis points, this could have a positive impact for Bitcoin and cryptocurrencies, as it may foster a more favorable environment for risk assets, in general.
However, the current nervousness also suggests that markets are divided. Analysts believe that Bitcoin’s recent drop could be a reaction to uncertainty over how markets will respond to the federal agency’s updated projections. For some, if the Fed’s guidance is dovish, Bitcoin’s price could break through its resistance and reach higher levels again.
On the other hand, one should not forget the impact that the electoral contest in the United States could have on the price of Bitcoin. Analysts suggest that the results of the presidential elections in November could have a significant impact on the future of Bitcoin and on the regulation of cryptocurrencies in the country.
Standard Chartered's outlook
Despite the uncertain outlook, Standard Chartered has issued optimistic forecasts about the future of Bitcoin. Geo Kendrick, the bank’s head of cryptocurrency research, argues that the price of Bitcoin could reach new all-time highs regardless of the outcome of the presidential election taking place in the United States this year.
Kendrick estimates that if Donald Trump wins, Bitcoin could reach a price of $125.000 per unit. He also estimates that if Kamala Harris wins the election, the leading cryptocurrency could reach a level of around $75.000 per BTC.
In the bank's report, which was published last week, Kendrick stressed that this optimism is based on the idea that, regardless of who occupies the White House, interest in Bitcoin and cryptocurrencies will continue to grow in the country and globally.
In short, the current price of Bitcoin seems to be a reflection of the intersection between monetary policy and the political climate in the United States. The expectation of a rate cut by the Federal Reserve has led to a drop in the price of Bitcoin, while the long-term outlook following the impending election cycle remains bullish for Bitcoin despite market uncertainty.
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