There will be no sharp correction following any potential interest rate cuts by the U.S. central bank in September or November.
This is the prediction from analyst ‘RamenPanda’ who explained their thinking in a lengthy post on X on June 27.
The analyst noted that during times of financial crisis, such as in 2008, the Fed cuts rates to preserve the economy. However, in that scenario, markets fared worse, and stocks fell following the cuts.
We all know it’s pretty certain that the US Fed will cut either in September or November. Many have feared a sharp drop in US stocks and #Bitcoin $BTC #Crypto citing 2008 precedent
My take is, NO, THERE WILL BE NO SHARP CORRECTION. Here is why
To put it simply, there are two…
— RamenPanda (@IamRamenPanda) June 27, 2024
Bitcoin Boom Following Rate Cuts
There is also another uncommon scenario in which the Fed cuts rates when the economy is doing reasonably well but rates are too high. They are currently at 5.25% to 5.5% where they have been for the past year.
“This, uncommon scenario, is the main reason why the Fed will cut interest rates this year.”
This would lead to a boom similar to that in 1995 when the Fed cut rates, sparking the dot com bubble over the next few years. This led to a flurry of investment in internet-related assets and the same could occur for crypto and AI-related assets this year, he opined.
“I think 2024 is very similar to that of 1995 instead of 2008. So buckle up, the AI bubble and Bitcoin bubble will be soon unleashed!”
It has been reported that BTC market movements are correlated with U.S. inflation data or Consumer Price Index (CPI) reports. These are heavily influential on Fed policy and its decisions to drop rates or leave them the same.
Earlier this week, analyst Willy Woo said that assets such as gold, stocks, and Bitcoin are a good way to beat CPI and monetary debasement.
While the Fed likes to report to you CPI Inflation (yellow line).
What you really need to beat is CPI + monetary debasement (while line).
It’s around 8% normally.
Gold keeps you on par.
SP500 will beat it by 3%.#Bitcoin will beat it by 20%-70%. pic.twitter.com/4ToBbvgxZb
— Willy Woo (@woonomic) June 24, 2024
Not So Fast…
Nevertheless, there could be more short-term pain before any significant gains. According to head of research at 10x Research, Markus Thielen, BTC could fall to $55,000 during this correction.
On June 28, he said that “weekly and monthly reversal indicators signal a broader correction.” BTC retraced 19% from its all-time high this week in a fall below $60,000 this week. However, it has not reached the current cycle average yet, which is around 22%, which would be a fall to $57,500.
If Thielen’s prediction comes to pass, the correction would be deeper at 25%, or an even deeper 32% if it falls to $50,000.
This current Bitcoin retrace got very, very close to the average -22% correction that we’ve seen across this entire cycle$BTC #Crypto #Bitcoin pic.twitter.com/e63woBCPDh
— Rekt Capital (@rektcapital) June 27, 2024
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