A widely followed crypto analyst is warning that a US Federal Reserve interest rate cut may not spark a bullish market for Bitcoin (BTC).
In a new video update, crypto trader Benjamin Cowen tells his 787,000 YouTube subscribers that historical patterns suggest a Fed rate cut would result in a downward trend for both the S&P 500 (SPX) and Bitcoin.
“With the S&P 500 going higher as rates were going higher [between 2016-2018], so, too, Bitcoin was going higher as rates were going higher.
Now, what you’ll notice last cycle is that at this [December 2018 BTC] bottom it actually corresponded to the Fed pausing rates, it corresponded to a pause. And the top that came in 2019 occurred before the first rate cut. So the first rate cut was in July . You can see it right here. So this cut, you can see that Bitcoin topped out before the first rate cut.”
The trader notes that the S&P 500 also hit market tops in 2000 and 2007 around when rate cuts started.
“Now, this is something that might not be intuitive when you first hear about it. Because normally we would think, Okay, well if you get a rate cut that means you’re going back to looser monetary policy, and therefore risk assets should start to do well.
But again, if you go look at the S&P 500, where we have a lot more data for, once you start to get rate cuts usually that’s where the market tends to start behaving pretty poorly. You can see rate cuts here started basically when the market topped [in August 2007]. Over here in 2000, the market had already topped before rate cuts began.”
He predicts that the S&P 500 and BTC will surge only after the Fed is near the end of its rate-cutting process.
“So when rate cuts start, it doesn’t tend to translate to an immediately bullish market, because oftentimes the reason the Fed is cutting rates is because they’re trying to compensate for perhaps keeping rates tight for too long and now the market is screaming for help. Normally, the first few rate cuts that the Fed does are not enough to turn the economy around. And again, the market will tend to bottom out close to the last rate cut.”
Other analysts have taken the opposite view and predict Bitcoin will soar as soon as the Fed is forced to pivot, including ARK Invest’s Cathie Wood.
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