Will Fed’s Rate Cut Impact Bitcoin’s $106K Peak?

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As a researcher with over two decades of experience in financial markets, I must say that the current surge in Bitcoin‘s price is nothing short of fascinating. Having witnessed multiple market cycles and economic shifts, I can confidently say that this bull run seems to be driven by unique factors such as institutional investments, political dynamics, and macroeconomic indicators.

Today, Bitcoin reached an unprecedented peak of $106,488, representing a 2.15% increase in the past 24 hours. This year alone, the foremost digital currency has experienced a significant surge of 147%, primarily driven by events such as the recent US election and increased institutional investments. Moreover, speculations suggest that a Federal Reserve interest rate reduction might occur this week. Many analysts interpret this potential monetary policy change less as a catalyst, but rather as a confirmation, for Bitcoin’s upward trend.

Luis Buenaventura, crypto leader at GCash, questions the influence of the Fed on price fluctuations. He points out that the market has been preparing for the rate cut for several weeks. In his opinion, data from past events suggests Bitcoin often experiences an additional 35% increase within two months following a 50% rise over a 60-day period.

According to Luis Buenaventura, he thinks that the anticipated Federal Reserve rate cut won’t significantly affect the current price pattern since investors have been anticipating it for several weeks already.

According to the CME’s FedWatch Tool, there is a high chance (93.4%) that interest rates could decrease by 0.25%, lowering them from 4.25% to approximately 4.50%. If this rate cut occurs as expected, it would be the second consecutive reduction, with the first one having taken place in November.

What the Fed’s Decision Could Mean for Crypto

On December 18 at 14:00 ET, the Federal Reserve is scheduled to unveil its decision regarding interest rates, predictions about future interest rates, and economic outlook. Following this announcement, Fed Chair Jerome Powell will speak to the press. Analysts expect that the Fed might adjust their predictions for rate reductions by the end of 2026, which could lead to a decrease in borrowing costs below 3%.

As an analyst at UTXO Management, I’ve observed that Henry Elder, our principal, commented on the market’s reaction to the latest inflation data, noting that it’s pleasing when inflation aligns with expectations. Currently, traders are engaged in a discussion about whether Bitcoin’s $100,000 valuation represents a ceiling or a new foundation. The resilient bullish mood permeating the crypto market seems to be bolstered by these macroeconomic signals.

After the US presidential election, Bitcoin’s impressive 145% growth this year has largely echoed broader market enthusiasm. The influx of funds from spot ETFs and increasing institutional interest have significantly boosted Bitcoin, often referred to as the “alpha crypto.” Similarly, Ether, currently priced at $3,891, has seen a resurgence, reaching close to $4,000 – only 19% below its all-time high reached in November 2021.

Trump Pushes for National Bitcoin Reserve

In simpler terms, the political climate might greatly boost Bitcoin’s rise. Previously elected President Donald Trump is considering establishing a strategic Bitcoin reserve at a national level. While specific strategies have yet to be outlined, Eric Trump hinted on Bloomberg TV that Trump could actively champion the cryptocurrency sector.

Avinash Shekhar, as the Co-founder and CEO of Pi42, highlighted the influence that broader economic trends are having on Bitcoin’s growth. He specifically mentioned Bitcoin’s persistent increase in value because of economic signals and forecasted reductions in interest rates by the Federal Reserve.

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2024-12-16 16:12