Bitcoin Weakens After The Fed's Interest Rate Cut, Is There Still A Positive Trend?

JAKARTA - A week after the US central bank, the Fed, cut interest rates by 25 basis points, the price of Bitcoin was still volatile and even briefly dropped to the level of $109,650 (Rp1.84 billion) this morning.

This movement raises interesting questions. This is because low interest rates usually encourage risky assets such as crypto and stocks to rise.

Responding to these conditions, Fahmi Almuttaqin as Analytic Reku said that the current drop in Bitcoin and Ethereum prices was due to the crypto market which had anticipated cutting interest rates long before last week's official announcement.

"Short-term liquidity had flowed rapidly to risk-on assets, including Bitcoin and altcoins, so that when the decision finally came out, some investors actually took profit-taking," he explained.

What's more, even though the Fed cut interest rates, Fed's balance sheet data shows the central bank is actually not aggressively expanding liquidity.

However, Fahmi sees this condition as quite supportive to support Bitcoin's positive projections and the crypto market in general in the remainder of this year.

"Although there is still a lot of uncertainty, including but not limited to the risk of the US government's shutdown, the outlook for cutting advanced interest rates twice, referring to the results of a dot plot poll on the FOMC last week could provide positive sentiment for the crypto market in particular if it is supported by stable inflation conditions," he added.

According to him, in the midst of the relatively solid trend of accumulation of institutional investors and the potential for the adoption of altcoin, Bitcoin and Ethereum have the opportunity to re-print new all time high.

However, he stressed that downside scenarios remain, such as the US government's shutdown which could trigger short-term cash flow stress and large-scale job cuts.

"In addition to the potential for a spike in inflation or starting to strengthen the dollar, it can also trigger a development of negative sentiment with the risk of a Bitcoin correction to below US$100,000 (Rp1.67 billion)," continued Fahmi.