TLDR:
- Bitcoin price rebounds above $61,000 following positive signals from Fed
- FOMC minutes suggest potential interest rate cut in September
- Spot Bitcoin ETFs see continued positive inflows
- Analysts predict Bitcoin could reach $500,000 by 2029 if inflation and dynamic supply are factored in
- Institutional investors showing increased interest in Bitcoin despite price volatility
The cryptocurrency market experienced a notable uptick on August 23, 2024, with Bitcoin (BTC) rebounding above the $61,000 mark.
This surge came in response to the release of minutes from the Federal Open Market Committee’s (FOMC) July meeting, which hinted at a potential interest rate cut in September.
The news sparked renewed optimism among investors, pushing the overall cryptocurrency market capitalization up by almost 2%.
Bitcoin, which had been struggling to break out of the $59,000 to $60,000 range over the past week, saw a jump of over 3%, bringing the digital asset above the $61,000 threshold.
Other major cryptocurrencies followed suit, with Ethereum (ETH) increasing by over 2% to $2,630, and Cardano (ADA) rising by 3%.
The rally triggered a significant increase in liquidations, with over $21 million in Bitcoin short positions being liquidated across centralized exchanges on Wednesday. The broader cryptocurrency market saw over $126 million in total liquidations during the same period, split evenly between long and short positions.
The FOMC minutes revealed a more dovish stance from the Federal Reserve, with the majority of participants indicating that easing monetary policy at the next meeting would likely be appropriate if economic data continued to align with expectations.
This shift in sentiment has led to increased speculation about the timing and size of potential rate cuts.
According to the CME FedWatch tool, there is a 67.5% probability of a 25 basis point cut and a 32.5% chance of a 50 basis point cut at the September meeting.
The market is now anticipating Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday, which is expected to provide further insights into the central bank’s monetary policy direction.
The potential for interest rate cuts has historically been a bullish signal for risk assets like cryptocurrencies, as lower rates can make them more attractive by reducing borrowing costs and encouraging investment.
However, some analysts caution that the relationship between rate cuts and Bitcoin price movements is not always straightforward, pointing to historical data from the 2019 cutting cycle.
Despite short-term price fluctuations, long-term projections for Bitcoin remain optimistic.
One analyst, incorporating inflation and the changing supply of Bitcoin based on the power law model, predicts that the cryptocurrency could reach $500,000 by 2029.
Current power law models don’t account for inflation or bitcoin’s changing supply. Correcting this increases the 2029 trend value from $300k to $500k, a 66% increase.
—Our current models use bitcoin’s spot price as a proxy for the value of the bitcoin network. I think this… pic.twitter.com/pRdGtotuPs
— apsk32 (@apsk32) August 21, 2024
This forecast, which is 66% higher than previous estimates, takes into account factors often overlooked in traditional power law models, such as the impact of inflation and the increasing supply of BTC.
Institutional interest in Bitcoin continues to grow, even in the face of price volatility. A report from asset manager Bitwise revealed that institutional investors “bought the dip” over the second quarter of the year, despite a 12% decline in Bitcoin’s price.
Matt Hougan, Bitwise’s chief investment officer, called this trend a “great sign” and suggested that institutional demand could drive significant price appreciation in a bull market scenario.
The launch of spot Bitcoin ETFs has also contributed to positive market sentiment. These funds have seen five consecutive days of positive inflows, bringing in approximately $39 million on Wednesday alone.
Since their launch, the 12 Bitcoin ETFs have accumulated a total of $17.56 billion in net inflows, with BlackRock’s IBIT leading the pack as the largest spot Bitcoin ETF by net assets.
