4 charts to understand BTC price trends under US interest rate cuts

Source: Blockchain Knight

BTC and Crypto asset markets are undoubtedly in a challenging environment right now, and seasonal movements in September have made things worse.

In a recent report, Kaiko researchers explored how potential U.S. rate cuts and other key economic events could affect BTC.

These four charts from analysts explain where BTC could go in the coming weeks.

According to Be In Crypto, the third quarter has historically been challenging for BTC and the broader Crypto asset market, and September tends to be the worst month for returns. Kaiko highlighted that BTC has fallen in September in seven of the past 12 years.

In 2024, this pattern has continued, with BTC down 7.5% in August and 6.3% so far in September.

As of now, BTC is trading 20% ​​below its all-time high of nearly $73,500 set more than five months ago.

However, according to Kaiko Research, the upcoming US interest rate cut may boost risky assets such as BTC. Alvin Kan, COO of Bitget Wallet, holds the same view.

"At the Jackson Hole Weibo conference, Federal Reserve Chairman Jerome Powell hinted that it might be time to adjust policy, sparking expectations of future rate cuts. The U.S. dollar index fell sharply in response and is currently fluctuating around 100."

Kan said: "With the September rate cut becoming a consensus expectation, the official start of the rate cut transaction may improve the overall liquidity of the market, thereby providing impetus for Crypto assets."

The report shows that September will be a highly volatile month, with BTC's 30-day historical volatility soaring to 70%. This indicator measures the volatility of asset prices over the past 30 days, reflecting the sharp fluctuations in asset prices during this period.

BTC's current volatility is almost twice last year's level and is approaching its peak in March, when BTC hit a record high of more than $73,000.

Ethereum has also experienced sharp volatility, exceeding March levels and BTC levels, driven primarily by Ethereum-specific events such as the liquidation of Jump Trading and the launch of the Ethereum ETF.

Since early September, BTC's implied volatility (IV) has risen after falling in late August. The IV indicator measures the market's expectations for future price volatility based on current options trading activity.

Higher IV values ​​indicate that traders expect greater future price volatility, but do not indicate the direction of volatility.

It is worth noting that the largest increase was seen on short-term option expiration dates, with the September 13 expiration date jumping from 52% to 61%, surpassing the month-end contracts.

For ordinary people, when short-term implied volatility exceeds long-term volatility, it indicates increased market pressure, which is called an "inverted structure".

Risk managers often view inverted structures as a signal of increased uncertainty or market pressure. Therefore, they may interpret this as a warning to reduce the risk of their portfolios by reducing exposure to unstable assets or hedging potential downside risks.

Kaiko researchers noted: "Market expectations are consistent with last week's US employment report, which dampened market hopes for a 50 basis point rate cut. However, the upcoming US CPI data is still likely to influence market expectations."

The BTC volume chart also highlights the volatility of the current market, showing increased trader participation. Cumulative trading volume is close to a record $3 trillion, up nearly 20% in the first eight months of 2024 after reaching the previous peak in 2021.

Traditionally, BTC investors view rate cuts as positive market catalysts. However, the market's interpretation of a larger-than-expected rate cut remains worrisome. 10X Research founder Markus Thielen warned that a 50 basis point rate cut could be seen as a signal of urgency, potentially triggering a pullback in risk assets such as BTC. "While a 50 basis point rate cut by the Fed could signal deeper concerns to the market, the Fed's priority is to mitigate economic risks, not manage market reactions," Thielen said in a note to clients. In addition to rate cut speculation, other factors contributing to volatility in the Crypto asset market include the upcoming U.S. election. According to relevant reports, the debate between Trump and Harris is expected to trigger market volatility, especially for BTC and Ethereum.