Key facts: On September 18, the Fed is likely to announce interest rate cuts. The price of Bitcoin is affected by macroeconomic events. The uncertainty surrounding the upcoming Federal Reserve (Fed) meeting and the US presidential election is causing high fluctuations in financial markets, without exception. “Investors should prepare for high volatility,” says market analyst John Mason, who points out that These events will have a profound impact on economic policy and the performance of various assets.
The US economy, although showing signs of “solid growth,” faces moments of uncertainty, he notes. According to Mason, the real Gross Domestic Product (GDP) in the North American financial power grew by 3.1% year-on-year in the previous quarter, a rate higher than that recorded during the recovery from the Great Recession. “It is important to maintain growth to avoid recession. This result is also positive and bullish for the dollar,” commented trader Daniel Muvdi on his X account. In addition, unemployment, which fell from 4.3% to 4.2% in August, as reported by BitcoinDynamic, remains at “levels consistent with a moderately growing economy,” says the trader.
Unemployment rate in the United States. Source: Fed. However, it warns that The next few weeks will be crucial for the markets due to two key factors«What happens in the next two months will have a long-term effect on the stock market,» Mason said.
Two factors for long-term markets
The first big event will be the upcoming Federal Open Market Committee (FOMC) meeting of the Federal Reserve, scheduled for September 17-18. The focus is on whether the Fed will cut its interest rate, a decision that Mason says will be “very important” to the future direction of markets. The investor community—according to Mason—believes there is a high probability that the Fed will make its first rate cut in four years, which will be a significant step forward for the Fed. It could have significant repercussions both on traditional markets and on assets considered «risky»like bitcoin. The possible cut in interest rates could be moderate, 25 basis points (0.25%) or a little more aggressive than 50 basis points (0.50%). If the latter option is implemented, it could further increase volatility in the markets. According to a report by the analysis firm Kaiko, A rate cut would boost digital assetswhich already show a historical trend of volatility in September, known as the “September effect”, as seen in the chart.
Bitcoin prices in September. Source: Kaiko. Historically, bitcoin has seen declines in seven of the past twelve Septembers, and this year has been no exception, with a 7.5% drop in August and 6.3% in September. Bitcoin's 30-day volatility has risen to 70%, almost double the levels recorded last year and approaching the March peakwhen the price of BTC reached its all-time high of $73,500. The second major event that has markets on alert is the US presidential election, scheduled for November 5. Mason highlights that Market volatility tends to increase between one and three months before electionsespecially if the ruling party appears vulnerable to defeat. As BitcoinDynamic has reported, Democratic candidate Kamala Harris is losing in the polls to Donald Trump, the Republican candidate, whose pro-bitcoin stance has been highlighted in the presidential campaign. “This uncertainty is causing quite significant swings in stock market prices and I think volatility will continue during the election,” Mason said. Kaiko also points out that the increase in bitcoin volatility has been accompanied by increased market participation. The cumulative trading volume of bitcoin in the first eight months of 2024 has increased by 20% compared to the previous peak in 2021, approaching a record of $3 trillion. With these two major uncertainties on the horizon, investors should be prepared for a highly volatile environment and make decisions with caution.