Bitcoin could be heading for a steep fall. If the Federal Reserve goes ahead with a rate cut this month as many expect, Bitfinex analysts suggest Bitcoin’s price might drop by 15-20%, possibly hitting a low near $40,000.
This prediction is based on Bitcoin’s increasing correlation with traditional markets like US equities. Basically, if stocks take a hit, Bitcoin might not be far behind. The global economic climate is still the puppet master here, pulling Bitcoin’s strings.
Already, September isn’t exactly a calm month for Bitcoin. Now, throw in a potential Fed rate cut, and you’ve got a recipe for chaos. Right now, the correlation between Bitcoin and American stocks is climbing.
Late July saw the correlation start to rise, and it hasn’t slowed down. As the rate cut and elections approach, the analysts expect this to continue.
Looking at the US economy, things seem fairly steady on the surface. There’s ongoing disinflation, which is a fancy way of saying that prices aren’t rising as fast as they used to. People are spending, and wages are growing faster than inflation.
The Fed’s favorite inflation gauge, the PCE index, was up by 2.5% in July, reinforcing the idea that inflation is under control. The GDP growth was also stronger than expected, getting revised up to 3% from 2.8%.
So, less reason for panic there.
But the housing market is still taking a hit. Pending home sales fell to a record low in July, even with lower mortgage rates. This tumble might not last, though.
If mortgage rates drop further and the election year wraps up, the market could bounce back. And then there’s consumer confidence, which hit a six-month high in August. Folks are feeling good about the economy, even if they’re a bit worried about jobs.
But let’s zoom out a little bit. The 24X National Exchange has pitched a proposal to US regulators to launch a securities exchange that allows 24/7 trading of crypto ETFs.
And Australia has seen a massive surge in crypto ATMs, making it the third-largest market globally. The fallout from the 2007-2008 financial crisis made governments worldwide tighten their belts, imposing stricter regulations to avoid a repeat of that mess.
In the US, the Dodd-Frank Act was one such measure, while Basel III took a global approach. Today, policymakers are all about keeping things stable and managing inflation.
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