What To Expect From the FED Rate Cut Tomorrow for Bitcoin?
Is it all rainbows and unicorns, or is danger lurking in the dark? How will markets react to possible rate cuts?
If you know nothing of the markets and history, you would be certain that a rate cut, especially a more severe one, would be bullish for the markets. Lower interest rates mean cheaper money, hence more investments and economic growth. It also means less profits on bank deposits and, most likely, treasuries, so investors are forced to play in the trenches of stock, commodities, or real estate markets in order to at least beat the inflation eroding their wealth.
It’s sound logic and the “printing of free money” (low rates, IOU money, and quantity easing) that has been the go-to tool of the last few decades whenever danger lurks has indeed pushed up the prices of stocks and real estate to ever higher levels.
You would then justifiably expect the prices of stocks, indexes, and crypto to rise in the coming weeks and months. Not to mention the USA elections in November, and it’s fair to assume no recession will be allowed from the reigning party, as it would ruin their chances of reelection.
Is it ever really this simple?
Yes and no.
Yes, if your time horizon is in decades and you don’t care what happens in between. No, if you are focused on lower time frames and like to time the market.
Yes, if the markets perceive the rate cuts as a preemptive action supporting further growth. No, if the market perceives the rate cuts as a reaction to signs of trouble and instability.
Yes, if the markets feel relief after a shock in the system. No, if the markets are about to crash, as this is seen as a panicked move by the Fed.
Yes, if it comes at the right time. No, if the timing is off.
Yes, if the market participants are bullish. No, if they are scared.
Yes, if the rate cuts are within the predicted parameters and mild. No, if they exceed predictions as they indicate the FED sees something the market does not.
As mentioned above, while it’s predominantly bullish, there have been times when it led to selloffs in the weeks after, as well as recessions. Keep your expectations in check and prepare for both scenarios. A “sell the news” event might not be likely, but it is entirely possible!
Where are we today?
It’s hard to argue that, at least as far as the markets are concerned, we’re anything but bullish. I mean, just look at these beauties. Sometimes, I think I’m in the wrong business (crypto).
Despite the official data, there is lingering inflation. There are some signs of trouble in the industry, with slowing growth, firings around the world, a slowdown in sales numbers, and an intangible sense that “not everything is rosy, though the numbers don’t show it.”
Bears have been hurting in the last few years, bordering on extinction, so choose your dominant attitude carefully!
My expectation for FED rate cuts in relation to Bitcoin and crypto
Increased volatility in the first few days and weeks on both sides.
There is a possibility of a deeper pullback in the legacy markets if there are any signs of weakness.
That pullback, should it happen, is a buy-and-hold for at least the next few months.
I still think we’re in a bull market (bitcoin and crypto), though it is an appalling one. The peak has not yet happened. If anything, it hasn’t even started (a cross of the previous ATH signals the new bull cycle).
As I'll explain later, I might consider a short on Bitcoin in the coming days, but I’m fully aware it’s a risky proposition.
If I get the dip, I will try to buy it unless it looks like the “world is ending.”
The bitcoin situation - September 2024
As mentioned, I’m bullish and have been bullish for the past year. Unfortunately, this has been excruciatingly boring and frustrating, as no bull move has any legs.
As far as the cycle is concerned, we’re at the point where we should explode upward and continue the upward trajectory well into 2025 (march 2025 to October 2025).
Bear in mind that previous cycles and historical price movements don’t guarantee a repeat in the future. Anything can happen at any time in the markets. No one knows the future, least of all me!
Monthly chart of Bitcoin
If we remain zoomed out and look at the monthly, everything looks good. The direction is up and to the right. Bullish!
The daily chart of Bitcoin
If we zoom in on the chart, we see a slightly less bullish picture. In fact, we cannot unsee the downtrend of the last few months. Leaning bearish for now.
Yeah, there are no complicated indicators and oversaturation on my charts—not if I can help it. They just confuse me, and most of the time, they fire off contradictory signals.
I like my charts like I like my women - as naked as possible!
So, what am I looking for in the price of Bitcoin?
Just kidding. Or am I?
Here’s my “worst-case” scenario for the next few weeks and months
I don’t particularly like it because it would kill the last bull spirit in this market, taking out everyone who is long on leverage in one huge cascade. However, I would give it a 30% chance, to be honest.
Okay, so the worst-worst-case scenario would be a proper bear market and a recession the likes the world hasn’t seen, but we’re not there yet, and let’s not talk about it must, lest we manifest that particular hell on Earth!
My least favorite version is more of the same
More ranging and fakeouts confusing everyone even further, especially if the legacy markets react positively, but “we” do not. Still, as you can see, I expect an eventual resolution upward. Somehow, this seems to be the most likely scenario, and I hate it.
Woohoo, we’re going to the moon scenario
We can do this all day - make up random lines on the chart - but three is enough. What if, just what if, we actually break the downtrend structure on this six-month consolidation and kill all the bears on the way up in one mesmerizing short squeeze? It’s possible. Some think it is even probable. I’m not one of them, but I’m open to the idea.
I could be an old grouch for not believing it until I see it, but I am positioned so that I profit either way! I’m all in SPOT because I believe the bigger “risk” is on the upside, not the downside.
If any dip scenarios are realized, I might short or hedge. Alternatively, I hope to build long positions near the bottom (primary goal and plan).
If the downtrend is broken and we get a convincing higher high, I’m completely changing my tune, and it’s a bull market madness party all the way.
Is it possible that the bull market is over, and we are entering a recession?
Anything is possible at any time, friends. This is the cruel reality of the markets.
I don’t think it’s the likely scenario, even though everything within me is screaming that the legacy markets, indices, and stocks have been going up for far too long without a proper crash. The same is true for the real estate markets. Everyone is making money, and that just never ends well.
To me, everything seems so overblown in price terms that it deserves to crash and burn. It’s disgustingly expensive, except for crypto, which has been the flea-infested mutt on the litter. I am a buyer in the real estate market, and I just refuse to pay twice what I would have paid only two years ago. It’s madness, I tell you, madness!
But, I have eyes and see the charts and data which suggest that all is well in Gringo land, where it dictates everything for the rest of the world.
What does all this mean for your underwater altcoins?
A bull market for Bitcoin is a bull market for altcoins. A rising tide lifts all boats except your favorite dinosaur coins. Bear in mind that Bitcoin tends to overperform when the trend turns bullish, and then altcoins play catch-up.
As you probably know by now, I’m not exactly an altcoin whisperer, so I won’t promise your untold fortunes because you buy my bags. However, I will say that there are altcoins out there that consistently overperform. Stick to those, and no, that is not the big Russky internet computer everyone hates with abandon.
I still think this is the Bitcoin, Solana, and Meme coins market, so I will place my bets there. Picking the ones who will wildly overperform seems impossible to me, and complete and utter gambling—a matter of luck, but then again, this is not the game I play.
KISS approach
Until we get a higher high, we’re in a downtrend. In a downtrend, resistance is more likely to hold, and support is more likely to break.
Until we escape this range, the range holding is a safe assumption.
The trend is your friend until it’s not. The trend on all time frames except the largest is down.
Until we see how the legacy market reacts to the FED rate cuts, it’s all a guessing game.
Until a bottom is in, we won’t know if it has been put in. Maybe this was the bottom, or maybe it will be taken out again.
If Bitcoin drops to the mid-forties (40,000 - 49,000 USD), which would be about a 20-30% drop from the last lower high and 40% from ATH, then we can expect altcoins to drop a lot more, somewhere in the 30-50% range.
At those levels, at least a decent bounce can be expected if this is still a bull market. In bear markets, that would be a much riskier proposition. I would be a buyer of spot positions if I weren’t all-in already.
At this stage of the market, the bigger risk is still to the upside in Bitcoin and crypto (cycles), but that doesn’t mean we can’t just switch to an economic recession, and these prices will seem like a distant memory of good times in a few months. I’m not betting on it, though. Yet.
If the price of Bitcoin jumps over ATH, it’s party time, or at least it should be.
Good luck out there, and I hope that good times are ahead. I just don’t think it will be as straightforward as green candles for the next twelve months, but it would be nice. We deserve it! Right? Right?
Fancy something else to read because you, too, are bored with this market?
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