Bitcoin Price Reclaims $91k as JP Morgan Predicts December Fed Rate Cut

The Bitcoin price has climbed back to $91,000 after several weeks of low performance. This price rise is in response to the anticipation that there will be a federal rate cut in December this year. JP Morgan has predicted that there will be a rate cut of nearly 25 basis points, and the decision will be taken at the next meeting of the Federal Open Market Committee (FOMC). 

How will the Rate Cut Affect Bitcoin’s Price?

The December rate cut will boost Bitcoin’s price in the market with an increase in investor confidence in such volatile assets. With rate cuts, investors’ interest will flow to high-yielding assets such as Bitcoin. JP Morgan’s prediction of an anticipated rate cut has resulted in Bitcoin’s price rallying to nearly 80-85% high.  

The current price rise is speculative of the rate cut news. However, the rate at which it will materialize is a cause of concern. The price can rise or fall depending on the post-rate cut communications made by the authorities regarding future rate cuts. If the market remains volatile throughout, the price may also fall back to $80,000-$82,000 range. 

What Historical Bitcoin Moves Followed Past Federal Rate Cuts?

Most of the Bitcoin bull runs in the past were a result of federal rate cuts. For instance, in 2020, when fed rates were cut as a result of the COVID-19 pandemic, the price of Bitcoin rose from $4000 to over $60,000 by the end of 2021. 

However, Bitcoin has also seen massive drops in the past due to rate cuts. In 2019, when the Fed rates were cut, Bitcoin didn’t see a phenomenal rise because investors were more anticipative of the market than reactive. Similarly, in 2018, Bitcoin markets became bearish following a rate cut. 

The general trend is that rate cuts offer a congenial environment for Bitcoin, making risk assets more attractive and encouraging institutional flows. This is especially true with the Bitcoin ETFs gaining prominence during this time. Even if there is a short-term volatility accompanying the rate cuts, they would gain momentum and rally to highs eventually. 

What Bitcoin On-chain Changes to Watch Out For? 

Investors should watch out for on-chain metrics such as exchange balances, active addresses, and supply shifts to understand the future position of Bitcoin.  With the rate cuts, there will be high liquidity inflows to Bitcoin, which will result in increased on-chain activities. The real yields will be lower, making Bitcoin suitable for long-term holding. Investors should also look out for the performance of Bitcoin ETFs and derivatives to understand if the token is trading at favorable positions. 

The Bottom Line

If a federal rate cut happens in December, it is expected that Bitcoin will recover from the current dip and climb back to $100,000. Such rate cuts were generally favorable for Bitcoin in the past. Analysts are therefore positively inclined to a price rise for Bitcoin.

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