Bitcoin presents potential opportunity for massive upside ahead of Fed rate decision and historically positive Q4

• Bitcoin and the crypto market have rallied in recent hours as investors anticipate Wednesday’s FOMC meeting.
• The CME FedWatch tool reveals a higher probability of a 50 basis point rate cut, which has a historical correlation with crypto bull runs.
• Historically, Bitcoin has performed better in Q4 compared to other quarters.

Bitcoin (BTC) and the crypto market rallied on Tuesday following speculation that the Federal Open Market Committee (FOMC) may opt for a 50 basis point rate cut during its meeting on Wednesday.

Bitcoin rate and Fed reduce correlation amid Q4 positivity

Cryptocurrency investors are getting active again amid growing anticipation that the Federal Open Market Committee (FOMC) could decide on a substantial 50 basis point interest rate cut on Wednesday.

CME’s FedWatch, a tool that measures the Federal Reserve’s target funds rate, provides insight into how market participants are positioning ahead of the meeting.

“According to the CME FedWatch tool, markets have a 38.0% chance of a 25 basis point Federal Reserve rate cut at the September meeting, while the probability of a 50 basis point cut has increased to 62 .0%, from 50.0% just a day earlier,” wrote FXStreet analyst Akhtar Faruqui.

A 25 basis point cut by the Federal Reserve would represent the most significant surprise of 2008 by a considerable margin. Instead, a 50 basis point cut would be the biggest unexpected move since 2009, Kobeissi Letter analyst noted.

As a result, the upcoming FOMC meeting on Wednesday greatly influences the price of Bitcoin and the overall cryptocurrency market. Bitcoin is up 4% in the last 24 hours, passing above $60,000

Several altcoins also saw growth with Bitcoin, Ethereum, BNB, Solana and XRP rising 4%, 3%, 1.5% and 1% respectively. The market’s brief rally resulted in liquidations reaching $125 million in the past 24 hours. 24-hour Bitcoin liquidations reached $45.66 million, while Ethereum liquidations reached $26.80 million.

Historically, Bitcoin and the broader crypto market have experienced price increases during periods of low interest rates. This trend was particularly evident during the crypto market bull run of 2017 and the initial coin offering (ICO) boom, when rates hovered around 0.75% – 1% and 1% – 1.25%.

USINTR/BTCUSD Weekly Chart

Another notable trend is visible in the market rally from late 2020 to 2021. Following the Federal Reserve’s decision to cut interest rates to a range of 0% to 0.25% in response to the pandemic, Bitcoin began remarkable growth, exceeding 1,000% in one year.

However, the market has seen a pullback as the central bank has started to raise interest rates again in 2022. The recent outlier is the brief spike in Q1’24, which was caused by the approval of the Bitcoin ETF.

Meanwhile, crypto investors anticipate a market recovery from Q3 as Q4 approaches. Historically, Q4 turned out to be the best period for Bitcoin, rising by an average of 88.84%.

BTC quarterly returns

Therefore, the positivity surrounding Q4 and the possibility of a 50 basis point rate cut may spark a significant rally among crypto assets.