Cryptocurrency analyst Benjamin Cowen believes one monetary policy move could lead to a fall in the price of Bitcoin (BTC) and altcoins.
In a new strategy session, Cowen tells his 922,000 YouTube subscribers that a rate cut by the Federal Reserve next month could trigger a correction in risk assets such as stocks and crypto as bond yields turn higher.
Bond yields can climb after Fed rate cuts if markets expect higher inflation ahead. In that case, long-term yields such as the 10-year tend to rise to compensate investors for diminished purchasing power.
Says Cowen,
“Altcoins will likely get a correction on their US dollar pairs in September, is because I think Bitcoin is going to visit that bull market support band in September.
And I’ve had some people reach out and be like, well, what about rate cuts? There’s a rate cut in September, so why would Bitcoin drop? You know, it could actually be due to a combination of things. But one of the easiest narratives to follow is that markets price things in before they actually happen.
And while it’s likely they’re going to cut rates in September, it’s also likely that the bond market is going to have a negative reaction to that…
And so when the Fed cuts, more than likely in September, there’s a really good chance that the 10-year yield will likely go up…
And that move by the 10-year yield could be responsible for Bitcoin getting that pullback potentially back to the bull market support band in September.”
The bull market support band is a technical analysis tool comprised of the 20-week simple moving average (SMA) and the 21-week exponential moving average (EMA).
Last week, the Producer Price Index (PPI), an inflation metric, came in hotter than expected. Cowen believes that rising inflation will trigger rising yields in long-term bonds.
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