Crypto analyst Benjamin Cowen has issued a warning about the potential negative impact on bitcoin (BTC) and the S&P 500 (SPX) from potential Federal Reserve interest rate cuts, contradicting the conventional wisdom that rate cuts lead to improved performance for risk assets.
Today, Cowen pointed to historical patterns that suggest both the BTC and the SPX are likely to experience a downtrend following a rate cut. He pointed to the period from 2016 to 2018, when rate hikes coincided with rallies in both markets.
He noted that the bitcoin market bottomed when the Fed paused rates in December 2018, followed by a market peak before the first rate cut in July 2019. Cowen also pointed to similar trends in the S&P 500, which saw market peaks around rate cuts in 2000 and 2007.
Challenging conventional wisdom, Cowen argued that markets typically deteriorate once rate cuts begin. He predicts that both the BTC and the SPX will rally only as the Federal Reserve nears the end of its rate-cutting process, as initial cuts often fail to sufficiently stimulate a strained economy.
Despite Cowen’s warnings, positive bitcoin price predictions have emerged in recent weeks, largely influenced by the acceptance of the BTC ETF. Cathie Wood of ARK Invest has a contrasting view to Cowen’s, predicting that bitcoin will soar once the Fed is forced to pivot.
