Bitfinex analysts warn that Bitcoin could drop by up to 20% as the Federal Reserve’s upcoming interest rate decision introduces uncertainty.

The price of Bitcoin (BTC) might be on the verge of a 20% decline, as Bitfinex analysts warn that the cryptocurrency’s future is highly contingent on this month’s Federal Reserve interest rate decision.

In a research report published on Sept. 2, the analysts attributed Bitcoin’s recent 32% surge to speculation of a dovish Fed stance. However, they note that the anticipated rate cut could “significantly influence both Bitcoin’s short-term volatility and long-term trajectory.”

A 25 basis point cut is likely to signal the beginning of a typical easing cycle, which could lead to long-term price appreciation for Bitcoin as liquidity increases and recession fears ease.

Bitfinex analysts

The analysts further warned that a more “aggressive” 50 basis point cut might cause an immediate price spike but could be followed by a “correction as recession concerns escalate.”

In the past week, market dynamics have shifted. Spot holders are de-risking now, the analysts say, adding that perpetual market speculators are attempting to “buy the dip,” which can be seen in “significant long open interest on BTC perpetuals.”

Bitcoin faces turbulent month

Analysts predict that Bitcoin could face a 15-20% decline following a rate cut, with a potential bottom between $40,000 and $50,000. This forecast is based on historical data showing that cycle peaks in percentage returns typically diminish by 60-70% each cycle, alongside a reduction in average bull market corrections. However, they emphasize that changing macroeconomic conditions could quickly alter this outlook.

Historically, September has been a turbulent month for Bitcoin, with an average return of -4.78% and peak-to-trough declines of around 24.6%. The analysts note that this volatility, coupled with the risk of a “sell-the-news” reaction post-rate cut, could create “both risks and opportunities for traders.”

The Federal Reserve will meet on Sept. 17 and 18, with the majority of analysts and experts expecting an interest rate cut. However, it’s unclear how significant the change might be, as the U.S. economy shows signs of steady disinflation and strong consumer spending.