Why Federal Reserve’s Shift in Rate Cut Strategy is Bearish for Bitcoin

The U.S. Federal Reserve oversees the nation’s economic policy, affecting various markets, including cryptocurrencies. Recently, renowned financial analysis firm QCP, shared predictions into how the Fed’s latest approach to interest rates could be terrible for Bitcoin.

US’s Sticky Situation with Inflation

Inflation has stubbornly refused to go down over the past few months, staying higher than many would like. The Fed has to think about whether to raise or lower interest rates based on how long inflation has been going on. Historically, dropping interest rates has helped the economy grow by making it cheaper to borrow money. However, if this happens in an already escalating situation, it can make prices rise even more. 

In January, the Fed said it might cut rates three times this year. But since inflation is still high, they may change their minds. QCP analysts think that the fact that they aren’t cutting rates as planned is bad for Bitcoin. When the cost of borrowing money stays high, buyers may move their money away from riskier assets like Bitcoin and toward more secure options.

Bitcoin’s Reaction and Future Expectations

Following a significant outflow from Bitcoin ETFs, the largest single-day withdrawal, Bitcoin’s price took a hit but showed resilience by bouncing back. But QCP remains bullish, suggesting that we are in the middle of a liquidity rotation that could eventually push Bitcoin to new highs, especially after the halving, which has a history of increasing prices.

QCP offers a strategy called the “Enhanced Sharkfin.” They say it will protect buyers from big dips in the price of Bitcoin while still giving them a chance to make a lot of profit if the price goes up. This method seems especially appealing in the current market, where interest rates and inflation are hard to predict.

Now that the Federal Reserve’s two-day policy meeting is over, all eyes are on it. The latest economic figures from the Fed and comments from Chair Jerome Powell will be carefully looked through to see if there are any signs that their plans have changed. Any indication of fewer rate cuts than initially expected would confirm the bearish outlook for Bitcoin in the short term.