As Fed’s Powell Signals Upcoming Rate Cuts, the Price of Bitcoin Rises; Will It Reach $70K Soon? / Source: Cryptonews
In the wake of Fed Chair Jerome Powell’s Jackson Hole speech, where he hinted at the beginning of an incoming rate-cutting cycle from the world’s largest central bank, the price of Bitcoin (BTC) reached a new two-week high above $62,000 on Friday.
SUMMARY OF FED CHAIR POWELL'S REMARKS (8/23/24):
— The Kobeissi Letter (@KobeissiLetter) August 23, 2024
1. "The time has come for Fed policy to adjust"
2. Fed "will do everything" to support a strong labor market
3. Fed does not welcome further weakening of the labor market
4. Confidence has grown that inflation is heading to 2%…
The market regarded Powell’s comments as dovish. Powell gave off the impression of being more worried about labor market weakness than he was about inflation.
And that triggered a dovish reaction across financial markets.
US bond yields modestly declines and the US Dollar Index (DXY) hit fresh yearly lows under 101.00.
The expectation of lower interest rates and a Fed committed to bolstering the economy rather than stifling inflation, on the other hand, delighted US equity markets.
The S&P 500 rebounded above 5,600 to get back to a level that was very close to its record highs.
Cryptocurrencies were mostly up while gold (XAUUSD) sought a retest of its record highs above $2,500 per ounce.
The Fed’s decision to raise interest rates to multi-decade highs in 2022–2023 in response to the post-pandemic inflation spike is now anticipated to begin with the September meeting.
Because of the Fed’s looser policies, interest rates are falling, which will increase liquidity in the financial markets and the economy as a whole.
This liquidity is compelled to find a home in riskier assets like stocks, Bitcoin, and other cryptocurrencies due to lower risk-free interest rates (i.e. in US bonds).
That’s the Bitcoin price has long had a positive correlation to easing liquidity conditions.
BTC Back to $70K? Here’s Where the Bitcoin Price is Headed Next
In recent trading, the price of Bitcoin has retreated from intraday highs and was last trading at slightly less than $60,000.
However, risks remain tilted towards a retest of July’s highs in the $70,000 area.
The tailwind of approaching easier liquidity conditions is probably going to strengthen for Bitcoin as the first Fed rate cut draws closer.
Politics, meanwhile, may also work to your advantage. Pro-crypto Republican candidate Donald Trump is the modest favorite to win the US Presidential election in November, per Polymarket.
Most participants in the cryptocurrency market would prefer a Trump victory, despite reports suggesting that Democratic nominee and current vice president Kamala Harris might adopt a more favorable stance toward the industry than the current Biden administration.
This might provide Bitcoin with yet another short-term boost if that slight lead continues.
The surge in post-halving miner sales is probably going to level off soon, but longer-term supply-related tailwinds may also materialize soon.
And major sell events, namely the return of over 200,000 BTC to MT Gox creditors is behind us.
The US’s availability of Bitcoin ETFs indicates that, as bullish narratives intensify, buy pressure may soon surpass sell pressure.
As the Bitcoin price probes for a breakout of a pennant structure and its 50 and 200DMAs, a return to $70,000 is likely.
In the longer-run, Bitcoin remains very much on course to scorch higher towards $100,000 in late 2024/2025.