Bitcoin continues to climb toward the $40,000 level it hasn’t seen since the May 2022 explosion of the supposed “stablecoin” TerraUSD. A number of factors are propelling the price of Bitcoin, including a possible move toward the Securities and Exchange Commission’s approval of a Bitcoin ETF. But more important may be the Federal Reserve’s seemingly inevitable rate cut, which markets are now betting will begin by March.
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Bitcoin Price
The price of Bitcoin rose 1.8% in the 24 hours through late Saturday afternoon, to around $39,552, according to CoinDesk. Global Coinbase (PIECE OF MONEY), which operates a crypto trading platform, rose 7.25% on Friday market share. He continues to progress after Escape of November 24.
CNBC reported Thursday evening that the SEC had met with Grayscale, black rock (BLACK) And Nasdaq (SO) this week regarding their requests to launch a Bitcoin exchange-traded fund. Such a fund would allow investors to bet on the price of Bitcoin without having to directly purchase and store the cryptocurrency. This could open the door to a much wider audience of investors.
Earlier Thursday, the Fed’s main inflation gauge, the PCE price indexshowed that headline and core inflation stood at an annual rate of 2.5% in the six months to October.
The poor data continued Friday as the Institute for Supply Management’s manufacturing survey index remained stuck at 46.7, remaining in contraction territory below 50. Worse still, the ISM subindex employment slipped to 45.8. Result: the November employment report next Friday could show a loss of jobs in factories.
Fed rate cuts factored in
As inflation falls rapidly, the current federal funds rate of between 5.25 and 5.5 percent makes U.S. monetary policy the most restrictive in 25 years, the president said Thursday. of the New York Fed, John Williams. Growing signs of an economic slowdown suggest that this situation is unsustainable. Markets are pricing in the likelihood of a five-quarter point rate cut by the end of 2024, according to the CME Group’s FedWatch tool.
The outlook for lower interest rates reverses some of the appreciation of the U.S. dollar against global currencies. The U.S. dollar index has fallen 3% against other advanced economy currencies since the Nov. 1 Fed meeting. This eases inflation and borrowing constraints globally, particularly for emerging market economies.
Bitcoin’s bullish sentiment may have been boosted by a new blog post from cryptocurrency trader Arthur Hayes. He wrote that the weakening dollar will allow China to “engage in a massive round of stimulus measures” with less fear of the yuan weakening against the dollar.
“Since the dollar is the largest funding currency in the world, if the price of credit falls, all fixed supply assets like Bitcoin and gold will increase in terms of the fiat price of the dollar,” Hayes wrote.
Bitcoin synchronized with Nasdaq
The Fed’s reversal of unprecedented pandemic-era monetary stimulus began in November 2021, just as Bitcoin and the Nasdaq were hitting all-time highs. The collapse of TerraUSD wiped out $40 billion in market value. It also accelerated a wave of deleveraging that exposed epic fraud and dismantled absurdly risky business models based solely on cryptocurrency bullish scenarios.
Bitcoin’s revival largely followed that of the Nasdaq, which surged 39% from its Dec. 28 bear market closing low. The price of Bitcoin, which reached $68,990 in November 2021, stabilized around $16,000 late last year, before taking off in early 2023. However, the explosive 47% rise in Bitcoin since mid-October has come as the Nasdaq has climbed about 7%. %.
Stablecoins stabilize
Close Bitcoin observers point to other factors contributing to the recent strength. A Forbes article highlighted a 3.4% increase in stablecoins, the first monthly increase since the collapse of TerraUSD in May 2022. This collapse led to a nearly 40% drop in stablecoin market capitalization. The change in trend can be significant because cryptocurrency traders use stablecoins to buy cryptocurrencies using leverage.
Another short-term factor could be a billion-dollar drop in Bitcoin stored on exchanges. This could indicate confidence in holding Bitcoin for the long term.
Grayscale successfully sued the SEC, challenging its decision to block Grayscale’s proposed Bitcoin ETF. While there is no certainty of approval this time around, speculation is growing.
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