Crypto analyst Benjamin Cowen updates his view on Bitcoin (BTC) as investors begin to anticipate the possibility that the Federal Reserve will reverse its tight monetary policy in the coming months.
In another strategy session, Cowen tells its 789,000 YouTube subscribers know that when the Fed is going to cut rates, CME’s FedWatch Tool indicates is likely to happen as early as March, risky assets like Bitcoin could actually decline in value.
“When there are rate cuts, it is generally not the most bullish thing for risky assets, not because rate cuts in themselves are not bullish, but because a rate cut in itself is theoretically bullish.
But the problem is not the interest rate cut itself. That is why the interest rate reduction takes place. And in this cycle, especially given inflation, you would have to imagine that if there were to be a rate cut when inflation is so high, there’s probably a reason for that to happen. Last cycle we kind of got [Bitcoin] mid cycle top [in September 2019] right around the time the rate cuts arrived…
If you look at things like the S&P 500 or risk assets in general, they sometimes peak well before any rate cuts happen. Sometimes they peak slightly after they hit, but in most cases the coming rate cuts have not been a good thing for risky investments, at least in the short term. When it becomes a good thing for risky assets, it’s once you hit the last rate cut… Because once you hit the last rate cut, it basically means the market thinks the Fed has done enough and they’ve gone back to a sufficiently looser monetary policy. policies to get the economy back on track.”
Cowen also warns that Bitcoin could fall to test levels within the bull market’s support band, which is formed by the 20-week simple moving average (SMA) and the 21-week exponential moving average (EMA).
Says Cowen,
“I think it’s worth keeping an eye on the eight-week moving average this week. Again, it’s currently around $42,300, which is right around the current price. If we get below that, there’s a good chance we’ll be testing the bull market support band, which is all the way at $35,000 to $37,000. Just think about $36,000 where it is, which by the way would mean about a 13% drop from the current price to get back to the 21 week EMA and about a 16%-17% drop to get back to come. to the SMA of 20 weeks…
This is a pattern we’ve seen a lot.”
Bitcoin is trading at $42,704 at the time of writing.
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