Bitcoin Price: Will a September Rate Cut Spark Volatility?
September Rate Cut on the Horizon: What's Next for Bitcoin?
The possibility of a Federal Reserve rate cut in September is gaining momentum, potentially triggering short-term turbulence for Bitcoin (BTC) before any sustained upward movement.
Recent economic data, specifically the U.S. Producer Price Index (PPI) report released on September 10th, has fueled speculation about a rate cut. The annual PPI came in at 2.6% for August, lower than the anticipated 3.3%. The core PPI, excluding volatile food and energy costs, also missed expectations, registering at 2.8% against a forecast of 3.5%, according to the U.S. Bureau of Labor Statistics (BLS).
These figures mark the third instance in 2025 where the PPI has indicated deflationary pressure, strengthening the case for a more accommodative monetary policy from the Fed.
The CME FedWatch tool currently indicates a 91.1% probability of a 25-basis-point rate cut and an 8.9% chance of a 50-basis-point cut in September.
Rate Cuts and Bitcoin's Reaction
While the long-term outlook for Bitcoin may be positive, as evidenced by the U.S. Congress exploring the feasibility of a strategic Bitcoin reserve, short-term challenges remain.
Farzam Ehsani, Co-founder and CEO of VALR, noted that traders are closely monitoring upcoming CPI and PPI data, as well as the Fed's September rate decision. Ehsani suggests that a "sell the news" scenario could lead to a significant shakeout in the Bitcoin market before a definitive return of market conviction.
Analyzing Key Market Indicators
Historical data from CryptoQuant Insights reveals potential patterns in Bitcoin's behavior during periods of interest rate easing. For instance, after the Fed slashed rates to near zero in March 2020, the MVRV (Market Value to Realized Value) ratio fell to 1 before rebounding following subsequent liquidity injections.
During the easing cycle in late 2024, the MVRV hovered near 2. At the time of this report, the MVRV ratio stands at 2.14.
Exchange Whale Ratio
The exchange whale ratio, which measures the relative size of the top Bitcoin deposits to exchanges, tends to spike immediately following rate cut announcements, signaling potential short-term selling pressure. However, this ratio typically declines in the weeks and months following the initial spike, suggesting a potential for longer-term recovery.
In summary, Bitcoin investors should prepare for potential short-term volatility surrounding the expected September rate cut. However, historical trends suggest that this turbulence could pave the way for a more sustained rally in the long run.