Bitcoin Price Pushes Higher as Fed’s Powell Signals Incoming Rate Cuts - BTC to $70K Soon?
Bitcoin Price Pushes Higher as Fed’s Powell Signals Incoming Rate Cuts – BTC to $70K Soon?
Author Joel Frank Author Joel Frank About Author Since graduating with a degree in economics from the University of Birmingham in 2018, Joel has worked as a financial market/cryptocurrency analyst. He firmly believes that emerging crypto technology... Author Profile Share Copied Last updated: August 22, 2024 23:16 EDT
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The Bitcoin (BTC) price hit a new two week high on Friday above $62,000, in wake of Fed Chair Jerome Powell’s Jackson Hole speech, where he signaled the start of an incoming rate cutting cycle from the world’s largest central bank.
SUMMARY OF FED CHAIR POWELL'S REMARKS (8/23/24):
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 Kobeissi Letter (@KobeissiLetter) August 23, 2024
Powell’s remarks were interpreted by the market as dovish. Powell came across as both less concerned about inflation and more concerned about labor market weakness.
And that triggered a dovish reaction across financial markets.
US equity markets, meanwhile, cheered the prospect of lower interest rates and a Fed focused on supporting the economy rather than squashing inflation.
The S&P 500 rose back above 5,600, back to within striking distance of its record highs.
Gold (XAUUSD) also eyed a retest of its record highs above $2,500 per ounce, and cryptos were mostly in the green.
September’s Fed meeting is now expected to mark the start of a long await policy reversal after the Fed raised interest rates to multi-decade highs in 2022/2023 to address the post-pandemic inflation spike.
As interest rates decline thanks to easier Fed policy, this will boost liquidity levels in financial markets and across the economy.
Lower risk free interest rates (i.e. in US bonds) force this liquidity to find a home in riskier assets, like stocks, Bitcoin and other cryptos.
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
The Bitcoin price has pulled back from intra-day highs in recent trade, and was last trading just under $60,000.
However, risks remain tilted towards a retest of July’s highs in the $70,000 area.
As the first Fed rate cut nears, the tailwind of incoming easier liquidity conditions is likely to grow for BTC.
Meanwhile, politics could also be a tailwind. Pro-crypto Republican candidate Donald Trump is the modest favorite to win the US Presidential election in November, per Polymarket.
While reports have suggested that Democrat nominee and sitting VP Kamala Harris might take a friendly stance to the crypto industry that the current Biden administration, most crypto market participants would prefer a Trump victory.
If that modest lead was to extend, this could be another near-term tailwind for Bitcoin.
Meanwhile, longer-term supply related tailwinds could also soon come in – the spike in post-halvingminer selling is likely to ease soon.
And major sell events, namely the return of over 200,000 BTC to MT Gox creditors is behind us.
Bitcoin ETF availability in the US suggests that as bullish narratives grow, buy pressure could easily soon overpower 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.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.