September is historically a rocky month for bitcoin (BTC-USD) and broader markets, and with interest rate cuts and the US election ahead, the crypto market is in store for some volatility. Fundstrat vice president of digital asset strategy Sean Farrell joins Morning Brief to discuss how investors can best navigate the rest of 2024.

"I think it's important to step back from a high level and understand acute trading risks versus cyclical downturn risks," Farrell argues.

He continues, "If you step back and listen to [Federal Reserve Chair Jerome] Powell at Jackson Hole and think about the Fed's positioning around markets right now and how they've shifted focus away from inflation towards employment, they've kind of taken away the right tail — or should I say, the worst case scenario for crypto — which would be a stagflationary period in which real growth is slowing and the Fed has to step up and be hawkish regardless of that fact because inflation is soaring."

He notes that such a stagflationary period occurred back in 2022, causing liquidity conditions to tighten amid high inflation. However, it appears as if the Federal Reserve is moving away from that scenario as it gears up for its interest rate easing cycle, which will benefit bitcoin down the line: "We are certainly going to meet any kind of recession with more easing, more liquidity, in which case, bitcoin will be the fastest horse out of there."

Heading into the fourth quarter of 2024, Farrell recommends "keeping a little dry powder on hand for any kind of downside volatility... But we do think overall, the risks skew to the upside."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Melanie Riehl