Over the past month, Bitcoin has seen a decline while the Nasdaq and S&P 500 have experienced gains. Will the bulls return once liquidity flows back into the overnight cash markets?
As of Friday, September 13, Bitcoin has dropped by 6%, while the Nasdaq Composite is up 3.7% and the S&P 500 Index has risen by 4% during the same timeframe.
So, what’s happening with Bitcoin?
Is Wall Street applying bearish pressure on crypto through outflows from Bitcoin ETFs, redirecting those funds into stocks like NVDA, TSMC, and ASML? Or are Bitcoin miners selling off to cope with rising electricity costs since April?
Goldman Sachs Economist Predicts 25-50 Basis Point Cut
Goldman Sachs chief economist Jan Hatzius stated on Monday, “I wouldn’t rule out a 50 basis point cut, but 25 basis points seems more likely. The rationale is that the current fed funds rate, between 5.25% and 5.5%, is the highest in the G10.” He also noted that the U.S. has made more progress on inflation compared to most G10 countries.
Will Bitcoin’s Price Rise Following a Fed Rate Cut?
While past performance doesn’t guarantee future results, historical trends suggest a connection. Lower benchmark interest rates tend to boost both major Wall Street stocks and Bitcoin’s decentralized economy.
Periods of low rates have often coincided with significant Bitcoin price increases. For instance, when rates dropped to zero in 2020, Bitcoin surged nearly 8x to reach record highs. As the Fed began raising rates, Bitcoin adjusted to about double its pre-pandemic level. By late 2023, once the Fed halted rate hikes, Bitcoin surged again.
The news cycle surrounding crypto, particularly anticipation for a Bitcoin ETF, played a significant role during these periods. However, the relationship between monetary policy and Bitcoin prices remains strong, adhering to the principles of economic supply and demand.
Historically, Bitcoin’s four-year supply cycles have led to massive rallies, typically peaking 12-18 months post-halving. The most recent Bitcoin halving occurred on April 19.
The post Goldman Economist Eyes 0.25% Fed Cut: Will Bitcoin Ride the Wave? appeared first on CryptoPotato.
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