Everyone who has anything to do with the financial markets is currently talking about possible interest rate cuts that the US Federal Reserve will implement in the short term. The big questions that matter for Bitcoin price are:
- When will we get the first interest rate cut?
- How many interest rate cuts will the Federal Reserve make in 2024?
Earlier this week, the US Consumer Price Index (CPI) was released without any major surprises. Everything met expectations. The CPI was at 3.1%, down 0.1% month-on-month. Core inflation (Core CPI) was 4.0%.
Bitcoin price drops 6.5% in 20 minutes, crypto market is bleeding heavily
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The chances of interest rate cuts are decreasing
Due to a stronger than expected US labor market, the likelihood of interest rate cuts has decreased. The chance of the first rate cut in March 2024 is now 42%, compared to 53.5% last week.
The market currently expects the first rate cut to occur in May 2024, but of course the Fed’s press conference following today’s rate decision could change that.
For next year, the market is currently pricing in a 1.25% rate cut by the end of next year.
The central bank thinks about this completely differently. They expect an interest rate of 5-5.25% before the end of 2024. That’s quite a distance from the 4.25% that the market is predicting.
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What does this all mean for Bitcoin?
The focus for now is on the US Federal Reserve’s interest rate meeting. This could well be a pivotal moment for Bitcoin to potentially continue the uptrend of the past few months.
But I think there’s a good chance that Federal Reserve Chair Jerome Powell will repeat his standard routine. This means that its central bank will base future interest rate decisions entirely on the incoming data, that interest rates will have to stay at these elevated levels for longer to truly beat inflation, and that it will have to be careful about ending the interest rate campaign early.
It will also be interesting to see what the Federal Reserve now thinks about the chart above and what their interest rate expectations are for 2024, 2025 and beyond…
It is difficult to express short-term expectations about the price of Bitcoin now, but that we will see a spectacle in the United States tonight seems to be a certainty.
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