Some experts have warned that Bitcoin could experience a new low, sending its price down to $12,000. A series of macroeconomic events, such as the rise in the federal reserve rate and inflation data, have played a significant role in predicting the price of Bitcoin. The prediction has come at a time when the crypto market is in the red and the top cryptocurrency has lost about 60% of its value since its all-time high. At the time of writing, Bitcoin is trading at $18,992, a 6% decline from the last week.
Key Takeaways
- Crypto experts have predicted a massive crypto crash is coming.
- The Federal Reserve’s decision on the interest rate will play an essential role in determining the flagship cryptocurrency’s price.
- At the time of writing, Bitcoin is trading below $20k.
The Effect Of Federal Reserve Rate On Bitcoin
The Federal Reserve has begun its two-day meeting on Sept.20, and it is expected that on Sept. 21, it will raise interest rates again by three-quarter points. If this happens, it will be the third consecutive hike. A recent report by Goldman Sachs economists headed by Jan Hatzius also predicts that Federal Reserve benchmark rate hikes might accelerate faster than expected.
Amid macroeconomic chaos, a pseudonymous crypto expert, Doctor Profit, has warned that Fed’s decision will bring a bloodbath in the crypto market. He tweeted, ”Please consider FEDs next decisions. 0.75 [rate hike] already priced in, 1bps and we see blood.” He wrote that Bitcoin has price entered the bottom phase at current levels. He also posted a price-performance comparison between 2012-2016 and 2020-2022.
Twitter: Doctor Profit
Another prominent crypto analyst Justin Bennett said that a bearish trend has been forming in Bitcoin since May when the crypto crash began. He has predicted that Bitcoin is about to see a sharp decline that will drag the price of the flagship currency back to previous bear market lows in 2018, which means it could drop to $12,000.
Bitcoin is Acting Like a Stock
Bitcoin is often treated as a good hedge against inflation. That means inflation doesn’t affect the top cryptocurrency. It might not be the case always, since inflation data has affected Bitcoin’s price this year. That’s why there has been a historical correlation between the stock market and cryptocurrency volatility. A recent report claims that Bitcoin and contracts on the S&P 500 have a 60-day correlation coefficient of 0.72, just short of a record set in May. The correlation coefficient measures the strength of the linear relationship between two assets.
The Bottom Line
There was a positive sentiment that after the Ethereum Merge Bitcoin and the whole crypto market could recover a bit. However, nothing like that happened. Although the Merge was completed successfully without hiccups, the crypto market did not reciprocate. Currently, Bitcoin is acting like a stock, and Fed interest rate decisions will play a crucial role in determining the fate of the top cryptocurrency and, therefore, the entire crypto market.