Bitcoin to $200,000? Tom Lee says Fed will fuel next rally

11h ago•

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Bitcoin is back in the spotlight as investors position themselves ahead of next week’s Federal Reserve’s meeting, where US policymakers are expected to slash interest rates.

Lower interest rates usually incentivise investors to bet on risk-on assets like cryptocurrencies. Last year’s August rate cut ended up doubling Bitcoin’s price, and traders are betting that history is about to repeat itself.

The top crypto can “easily get to $200,000 before the end of the year,” Tom Lee, managing partner at Fundstrat Global Advisors, told CNBC.

“Bitcoin and cryptocurrencies like Ethereum are super sensitive to monetary policy,” Lee said. “September 17 is an important catalyst.”

September 17 is the date of the Fed’s meeting.

Similarly, Sean Dawson, head of research at Derive, said there’s a 23% chance that Bitcoin will surge 23% to trade above $140,000 by the end of the year. In a note to investors, he also suggested that Ethereum could surge 60% to hit $7,000 in the same period.

For crypto markets, the Fed gathering carries outsized weight. Digital asset markets are dependent on liquidity conditions, and Fed policy largely determines how much capital is available.

Markets are betting on a 0.25% cut to interest rates, with CME FedWatch showing odds at 88% as of Tuesday. But the soft August payrolls report has stoked chatter about a possible 0.5% move, which FedWatch shows odds at 12%.

According to Polymarket, the chances of a 0.5% rate cut have jumped from 10% late last week to 18% today.

Illia Otychenko, lead analyst at crypto exchange CEX.IO, told DL News that traders may already have priced in the smaller move.

“A 25 bps [0.25%] cut has been widely anticipated and is already getting priced into markets, so it may not spark significant volatility,” he said. “However, a 50 bps [0.5%] cut would be a surprise and could act as a real shake-up, as it would reset expectations for the rest of the year.”

Otychenko said a smaller cut will be “mildly positive, while a larger one could either accelerate risk appetite or spook markets,” depending on why such a big cut is made.

To be sure, while the market seems to have priced in a rate cut, there’s always a risk that the US central bank won’t cut rates. A hawkish surprise like that from the Fed would crush Bitcoin and tech equities, according to analysts at research firm Ecoinmetrics.

Dawson cautioned that there is a 20% chance that Bitcoin will dip below $100,000 and that Ethereum will fall down to $3,500.

Bitcoin ETFs attracted $368 million of inflows on Monday, with $1.1 billion entering over the past 10 days, according to tracking platform SoSoValue.