According to analysts, a larger-than-expected interest rate cut could paradoxically lead to a decline in Bitcoin’s price. As the Federal Reserve prepares to announce its decision on interest rates this Wednesday, some experts caution that an aggressive cut may harm Bitcoin (BTC) and other risky assets.
While lower interest rates typically increase demand for cryptocurrencies, a dramatic reduction might signal deeper economic concerns, prompting investors to pull back from riskier investments.
Shannon Saccocia, Chief Investment Officer at Neuberger Berman Private Wealth, told MarketWatch that a larger-than-expected rate cut could indicate that the economy is in worse shape than anticipated, leading to a sell-off in assets like Bitcoin.
This sentiment was echoed by Dave Birnbaum, Vice President of Product and Marketing at Coinbits, writing for Forbes. He noted that if the Fed hints at deeper economic worries, “market participants may pull back from assets perceived as risky, including Bitcoin.”
Crypto investors are hoping for another rally similar to previous cycles. In October 2019, the Fed implemented three cuts of 25 basis points, described by Fed Chair Jerome Powell as a “mid-cycle adjustment.” This period, along with the massive fiscal response to the COVID-19 pandemic, saw Bitcoin’s price surge over 1,300%, surpassing $60,000 by 2020.
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