Bitcoin price could see 20% drop, analysts warn

Bitfinex analysts warn that Bitcoin could fall as much as 20% as the Fed’s upcoming interest rate decision adds to uncertainty.

While it is stated that the Bitcoin (BTC) price could be on the verge of a 20% drop, Bitfinex analysts warn that the future of the cryptocurrency largely depends on this month’s Federal Reserve interest rate decision.

In a research report published on September 2, analysts attributed Bitcoin’s recent 32% surge to speculation about the Fed’s lenient stance. However, they noted that the expected rate cut “could significantly impact both Bitcoin’s near-term volatility and long-term trajectory.”

A 25 basis point cut is likely to signal the start of a typical easing cycle that could lead to a long-term price appreciation for Bitcoin as liquidity increases and recession fears subside.

Bitfinex analysts

Analysts also warned that a more “aggressive” 50 basis point cut could cause a sudden price spike but could be followed by “a correction amid rising recession concerns.”

Over the past week, market dynamics have shifted. Analysts say spot holders are now risk-averse and continuous market speculators are trying to “buy the dip,” which could be seen as “significant long open interest in BTC continuous.”

Bitcoin faces a turbulent month

Analysts predict that Bitcoin could face a 15-20% drop following the rate cut, with a potential bottom between $40,000 and $50,000. This forecast is based on historical data that shows that cycle peaks in percentage returns typically decrease by 60-70% each cycle, with a decrease in average bull market corrections. However, they emphasize that changing macroeconomic conditions could quickly change this outlook.

Historically, September has been a turbulent month for Bitcoin, with average returns of -4.78% and peak-to-trough declines of around 24.6%. This volatility, coupled with the risk of a post-rate cut “sell the news” reaction, could create “both risks and opportunities for investors,” analysts say.

The Federal Reserve meets on September 17 and 18, and the majority of analysts and pundits expect a rate cut. However, it is unclear how significant the change could be, as the U.S. economy has been showing signs of steady disinflation and strong consumer spending.