Bitcoin Price
Bitcoin is making a strong move towards the $40,000 mark, a level it hasn’t seen since the May 2022 blowup of the supposed “stablecoin” TerraUSD. Several factors, including potential Securities and Exchange Commission approval of a Bitcoin ETF, are driving the surge. However, the most significant factor could be the expected Federal Reserve rate cuts that the market predicts will start by March.
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Fed Rate Cuts Priced In
With inflation dropping rapidly, the current 5.25% to 5.5% federal funds rate is the most restrictive U.S. monetary policy in 25 years, according to New York Fed President John Williams. Market forecasts suggest a possibility of five quarter-point rate cuts by the end of 2024, as indicated by CME Group’s FedWatch tool.
The anticipated lower interest rates are dampening the U.S. dollar’s strength against other advanced-economy currencies, which could ease global inflation and borrowing constraints, particularly for emerging market economies.
Arthur Hayes, a cryptocurrency trader, wrote that the softening dollar might allow China to inject a significant round of stimulus with lesser concerns about the yuan weakening against the dollar, potentially driving up fixed supply assets like Bitcoin and gold in dollar fiat terms.
Bitcoin In Sync With The Nasdaq
Bitcoin’s resurgence is closely tied to that of the Nasdaq, which has climbed about 39% from its bear-market low. The parallel growth between Bitcoin and the Nasdaq suggests an intertwined market behavior.
Stablecoins Stabilize
Close observers of Bitcoin have noted factors contributing to its recent strength, including a 3.4% increase in stablecoins and a $1 billion decline in Bitcoin stored at exchanges, signaling growing confidence in holding Bitcoin for the long term.
Furthermore, Grayscale’s successful lawsuit against the SEC, challenging its decision to block Grayscale’s proposed Bitcoin ETF, has sparked speculation and potential anticipation of approval.
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