The prediction by analyst ‘RamenPanda’ suggests that there will not be a sharp correction following any potential interest rate cuts by the U.S. central bank in September or November. This prediction is based on the notion that during times of financial crisis, such as in 2008, the Fed cuts rates to preserve the economy. However, in that situation, markets fared worse, and stocks fell following the cuts. There is also another less common scenario in which the Fed cuts rates when the economy is performing well but rates are deemed too high. Currently, rates are at 5.25% to 5.5%, where they have remained for the past year.
The main reason cited for the potential interest rate cuts is the scenario where the economy is doing reasonably well, but rates are considered too high. This would lead to a boom similar to that of 1995 when the Fed cut rates, sparking the dot com bubble over the next few years. A similar scenario could potentially occur for crypto and AI-related assets this year, leading to a surge in investment in these areas. Analyst ‘RamenPanda’ believes that 2024 mirrors the situation of 1995 rather than that of 2008, indicating that an AI bubble and Bitcoin bubble may be on the horizon.
BTC market movements have been reported to be correlated with U.S. inflation data or Consumer Price Index (CPI) reports. These factors heavily influence Fed policy and its decisions to adjust rates. Analyst Willy Woo has suggested that assets such as gold, stocks, and Bitcoin can serve as a hedge against CPI and monetary debasement. However, there might be some short-term challenges to overcome before significant gains can be realized.
According to Markus Thielen, head of research at 10x Research, BTC could potentially fall to $55,000 during a correction phase. He pointed out that weekly and monthly reversal indicators signal a broader correction, with BTC retracing 19% from its all-time high in a recent fall below $60,000. The current cycle average stands at around 22%, indicating a potential drop to $57,500. Thielen’s prediction suggests a deeper correction at 25%, or an even more significant decline of 32% if BTC falls to $50,000.
The prediction of potential interest rate cuts by the U.S. central bank and their impact on the economy and financial markets remains a topic of interest and speculation among analysts and experts. The correlation between market movements, inflation data, and potential corrections in the market adds complexity to the overall economic landscape. Investors and stakeholders are advised to monitor these developments closely to make informed decisions.
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