Bitcoin Surges as Speculators Bet on Rate Cuts Sparking Frenzy
Bitcoin experienced a significant surge, reaching $61,337 on Tuesday, marking its most substantial intraday increase since early August. This surge coincides with speculation surrounding the Federal Reserve’s expected half-point rate reduction. The potential for a softer lending environment post-rate cut could pave the way for a resurgence in risk-on assets.
Investors are eagerly awaiting the Federal Reserve’s decision following its two-day policy meeting. The uncertainty lies in the extent of the rate cut, with markets indicating a 63% probability of a 50-basis-point adjustment. Irrespective of the cut’s magnitude, investors in bitcoin anticipate that looser lending conditions will fuel increased speculative activity.
Morgan Stanley highlighted a scenario where a 50-basis-point rate cut coupled with reassuring economic indicators could be the best-case outcome for equities. Conversely, a substantial rate reduction might unnerve investors, signaling economic concerns. Tuesday’s robust retail data helped allay recession fears, potentially contributing to bitcoin’s upward trajectory.
Leena ElDeeb, a research analyst at 21Shares, noted, “Retail sales surpassing expectations have been positively received by the market, easing recession apprehensions momentarily. There could be a resurgence in investors’ interest in risk-on assets like crypto, prompting more investments in Bitcoin spot ETFs.”
Since its peak at nearly $74,000 in March, bitcoin has struggled to regain momentum. Seasonal factors weakened spot bitcoin ETF inflows during the summer, while adverse macro conditions steered investors towards safer, risk-off assets.
Recent data shows a shift in sentiment, with crypto fund investments increasing by $436 million last week after two consecutive weeks of outflows. FxPro senior market analyst Alex Kuptsikevich highlighted this shift, attributing the surge in inflows to changing market expectations of a potential 50-basis-point rate cut following remarks from former New York Fed President Bill Dudley.
