Expectations for Spot Bitcoin ETF Give Way to Concerns about Fed’s Interest Rate Policy: Goldman Sachs Reveals Forecast!

• Investment banking giant Goldman Sachs reported on Monday that it has revised its forecast for the Federal Reserve’s first interest rate cut from the previous fourth quarter prediction to the third quarter.
• When interest rates drop, borrowing becomes cheaper, encouraging risk-taking in the economy and financial markets, including cryptocurrencies.
• Before the Federal Reserve’s interest rate decision announcement on Wednesday, December 13, Bitcoin started Monday with a sudden price drop, experiencing an 8% decline to around $40,200.

Investment banking giant Goldman Sachs outlines its expectations for the Fed’s interest rate policy: When will the Fed initiate an interest rate cut?

How Will the Fed Navigate Its Interest Rate Policy?

Investment banking giant Goldman Sachs reported on Monday that it has revised its forecast for the Federal Reserve’s first interest rate cut from the previous fourth quarter prediction to the third quarter. This change follows the recent bullish signals in the cryptocurrency market, including the expected launch of a spot ETF, the upcoming Bitcoin halving, and the decline in the 10-year US Treasury yield.

The Fed’s key interest rate is currently between 5.25% and 5.5%, and futures traders expect the Fed funds rate to fall into a range starting from 4% at the end of next year. When interest rates drop, borrowing becomes cheaper, encouraging risk-taking in the economy and financial markets, including cryptocurrencies. The opposite occurs when interest rates rise rapidly, as observed in 2022.

To curb inflation, the Fed began a tightening cycle in March 2022, raising interest rates from 0% to 0.25%, with the latest increase occurring in July. The rapid increase in interest costs last year put pressure on risk assets, including cryptocurrencies.

Sudden Decline in Bitcoin Price

Before the Federal Reserve’s interest rate decision announcement on December 13, Bitcoin started Monday with a sudden price drop, experiencing an 8% decline to around $40,200. Currently, the Bitcoin price is trading at $42,404, and Ethereum is at $2,246.

The amount of positions liquidated in the last 24 hours exceeds $380 million, with the largest liquidation occurring in long positions. The total value of long positions liquidated in the last 24 hours surpassed $332 million, while short positions approached $57 million.