Bitcoin Reaches New Heights as Fed Hints at Rate Cut in September

Cryptonews Economy Politics John Brightwater August 21, 2024

Bitcoin Reaches New Heights as Fed Hints at Rate Cut in September

The value of Bitcoin has once again surpassed $61,000, increasing by 3.5% in the last 24 hours after the optimistic release of Federal Reserve minutes from the July meeting on August 21. This surge also resulted in positive movement for other cryptocurrencies, with Ethereum experiencing a 1.5% growth, and Solana remaining at a decrease of 0.6% at the time of the report.

The minutes reiterate Federal Reserve Chairman Jerome Powell’s recent statement about a potential interest rate cut if market data continues to align with expectations. According to the document, “if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.” Furthermore, the document suggests the possibility of a 25 basis points (bps) rate cut due to “recent progress on inflation” and “increases in the unemployment rate,” potentially bringing the interest rate benchmark down to 5% from the current 5.25%.

This news is favorable for cryptocurrencies and other risky assets, as the decrease in bond yields makes them more attractive to investors. Notably, the equity market also responded positively to the Fed minutes, with the S&P 500, Nasdaq, and Dow Jones all recording positive movements of 0.42%, 0.57%, and 0.14% respectively by the end of the day.

Following the Fed minutes, the odds of a 25 bps cut have decreased to 72% from 77% on Polymarket, while the likelihood of a 50 bps or more cut has risen to 22% from 18%.

Despite the optimistic prospects for September, analysts at Bitfinex believe that the upcoming US presidential elections will significantly impact the crypto market. The increasing uncertainty surrounding the elections has led to a cautious approach among investors. According to the analysts, “As Democrat nominee Harris has seen an increase in odds of winning to almost equal Republican nominee, former President Trump’s odds, it induces uncertainty in markets, especially crypto.” Despite Vice President Kamala Harris’ odds of winning the election falling 10% below, former President Donald Trump’s odds have recovered to 52% on Polymarket, putting him 5% ahead of the Democrat candidate whose odds have fallen to 47%.

However, Bitfinex analysts are optimistic that the market will regain strength if Trump’s odds have indeed bottomed out, even amidst the uncertainty of the election outcome.

In conclusion, the recent surge in Bitcoin prices and the positive response of other cryptocurrencies to the Fed minutes hint at a potentially bullish outcome for the crypto market in September. However, the upcoming US presidential elections remain a looming factor of uncertainty for investors. As always, it is essential for investors to stay informed and keep a close eye on market developments to make well-informed decisions.