The share price of bitcoin was expected to decline as investors waited for the US Federal Reserve to make its decision to cut or keep the interest rate.
Trading platform FBS said on Thursday before the Fed’s decision that it projected a looming downturn for Bitcoin as the market players await the upcoming Fed’s decision.
The Fed chose to keep interest rates steady at between 5.25% and 5.5% on Friday.
"The Committee seeks to achieve maximum employment and inflation at the rate of two percent over the longer run," the Fed said in a statement.
Bitcoin jumped to around $43,186 (R804,530) yesterday, but was rejected and pushed back down to $42,000 as the US Reserve refrained from making changes to its monetary policy.
At 12pm on Friday, Bitcoin share price was $42,963 (around R801,264).
REASON FOR THE BITCOIN SHARE DECLINE
The FBS analysts looked at Bitcoin’s behaviour from 2017 to 2020, and noted that there was a remarkable 370% surge in early 2019 to $13,000, following public anticipation of the rate cuts.
The analysts did note that the trend reversed as the rates started declining, leading to a bearish bitcoin share price.
“The 2021-2024 scenario witnessed the Federal Reserve's increasing interest rates to combat inflation. Despite initial expectations of such rate hikes dampening the demand for risk assets, Bitcoin's value surprisingly increased. The market dynamics shifted following the Fed's announcement of a pause in rate hikes in September 2023, with markets pricing in an upcoming rate decline,” the FBS said.
Looking at the 2024 financial market trends, FBS noted the striking similarities with Bitcoin’s 2017-2020 pattern.
They mainly highlight that bitcoin reached the 61.8 Fibonacci level at around $49,000 and subsequently bounced off, this coincided with market expectations of the potential rate cut by the Federal Reserve.
Given these parallels, FBS analysts think that Bitcoin's share price will decline towards the $36,000 target after the first Fed rate cut in 2024.