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BTC Bitcoin prices rebound after short-term pressure on Fed interest rate hike expectations
Given the strong U.S. jobs data released on Friday and the hawkish stance taken by Federal Reserve Chairman Kevin Warsh, market expectations for an interest rate increase have increased significantly in just seven days. Bitcoin's price responded to both news and recovered some of its lost ground after a small decline. However, actual interest-rate increases could have more far-reaching effects.
Where will Bitcoin go?
The last Federal Open Market Committee (FOMC) meeting in July was very tight and described as the most unpredictable in six years. In the end, the Federal Reserve voted 9 - 3 to refuse to adjust interest rates, maintaining it at 3.50%-3.75%. However, three policymakers supported this monetary policy shift, which became the first signal of potential change. Subsequent developments have mainly occurred in the past week or so, as Walsh appeared quite hawkish in his first speech at the Jackson Hole Annual Conference in late August. Yesterday's higher-than-expected U.S. employment data further exacerbated this trend, with the probability of raising interest rates now exceeding 50%, as it gave the central bank room to fight stubborn inflation through tighter monetary policy.
Next week's consumer price index (CPI) data is crucial. The FOMC meeting will be held from September 15th to 16th. Artificial intelligence platform ChatGPT believes that Bitcoin's initial response will be a sharp decline. However, the platform added that "we don't expect another catastrophic bear market decline."
Instead, it points out that the key to Bitcoin's response will be whether the rate hike will "be fully priced by then" and Kevin Walsh's statement on follow-up measures. "Currently, after surprisingly strong August employment data, the market has set the probability of a September rate hike at around 60%. As this probability has increased, Bitcoin has dropped from above $81,000 to approximately $79,650."
Accurate Prediction
This popular AI chat robot pointed out that if the Fed does raise interest rates, it is expected to see another 2%-5% decline within ten days after the FOMC meeting ends. This means Bitcoin will initially test the support level of $75,000. If yields continue to climb by the end of September, there may be a second round of decline to $72,000. In addition, if Walsh remains hawkish, Bitcoin may even fall below the $70,000 mark for the first time since mid-August. These scenarios are based on a 25 basis point increase in benchmark interest rates by the Federal Reserve.
In the more unexpected scenario of the central bank raising interest rates by 50 basis points, ChatGPT expects Bitcoin to quickly plummet as much as 15% to below $70,000 in a day or so. "A drop to $68,000 could happen instantaneously, and leverage liquidation could cause prices to briefly drop to the middle of the $65,000 range in a short period of time." It warned.
While all of these predictions sound bad for Bitcoin-after all, Bitcoin finally gained some breathing space during its rebound in mid-to-late August-it is worth noting that cryptocurrencies tend to fluctuate in directions contrary to public expectations.
