The prediction by analyst ‘RamenPanda’ suggests that there will be no sharp correction following any potential interest rate cuts by the U.S. central bank in September or November. This scenario is based on historical examples, such as in 2008 when the Fed cut rates during a financial crisis but the markets reacted poorly, leading to a decline in stocks. Another uncommon scenario is when the Fed cuts rates even when the economy is doing well but rates are deemed too high. Currently, rates are at 5.25% to 5.5%, and this could be the reason for an interest rate cut this year.
If the Fed decides to cut interest rates, it could lead to a situation similar to that of 1995 when the Fed’s rate cut sparked the dot com bubble over the next few years. This resulted in increased investment in internet-related assets. ‘RamenPanda’ believes that a similar boom could occur for crypto and AI-related assets in the current year. The analyst predicts that 2024 will resemble 1995 more than the crisis of 2008, signaling the possibility of an upcoming AI bubble and Bitcoin bubble.
BTC market movements have been reported to be correlated with U.S. inflation data and Consumer Price Index (CPI) reports. These factors heavily influence Fed policy decisions regarding interest rates. Analysts like Willy Woo suggest that assets such as gold, stocks, and Bitcoin can serve as a hedge against inflation and monetary debasement. However, there are concerns about potential short-term pain before significant gains. Head of research at 10x Research, Markus Thielen, warns that BTC could experience a correction down to $55,000, citing reversal indicators that signal a broader correction. As of June 28, BTC retraced 19% from its all-time high, falling below $60,000. While it has not yet reached the current cycle average of 22%, a further drop to $57,500 is possible. If Thielen’s prediction materializes, the correction could reach 25% or even deeper to 32% at $50,000.
Overall, the impact of U.S. interest rate cuts on the economy remains uncertain, with predictions and analyses pointing towards potential booms in certain asset classes while also raising concerns about short-term volatility and corrections.