Bitcoin rose today, approaching $60,000 as traders became increasingly optimistic about a significant rate cut by the Federal Reserve.
Bitcoin Price Surge
Bitcoin's price rose 2.5% on the day to $59,735, reversing losses from September, according to CoinGecko. BTC had fallen to as low as $53,300 just a week ago after a weaker-than-expected August employment report raised concerns about the U.S. economy.
Fed Rate Cut Expectations
Sentiment has shifted ahead of the Federal Reserve meeting, where it is expected to cut interest rates for the first time since 2020. Initially, investors were expecting a 25 basis point cut, but recent reports from the Wall Street Journal and the Financial Times suggest the central bank could consider a more aggressive 50 basis point cut. As of Friday, the probability of a 50 basis point cut had risen from 28% to 43%, according to CME Group data.
Analysts’ Take on the Rate Cut
The change in outlook is leading policymakers to focus more on the health of the labor market as inflation slows toward the Fed’s 2% target. A larger rate cut could ease monetary conditions by pushing the Fed’s benchmark rate closer to neutral. But some analysts warn that a more aggressive cut could signal deeper concerns about a potential recession, which could negatively impact riskier assets like Bitcoin.
Grayscale Research Director Zach Pandl stated, "Lower monetary policy and lower real interest rates tend to benefit peers like gold and Bitcoin while weakening the dollar. However, if the Fed were to cut 50 basis points, markets could interpret that as a sign that the Fed is worried about the economy, which could paradoxically hurt riskier assets, including Bitcoin."
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