Fed Looser, Global Macro Trends Point to Bullish Sentiment for Bitcoin - Analysts

Date: 2024-09-03 Author: Henry Casey Categories: CRYPTO PAYMENTS
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The bearish environment that dominated crypto markets in early August may have set the stage for a “tactical bottom for Bitcoin” supported by expectations of easier monetary policy in the US.

Sentiment around crypto assets fell to its lowest level since the FTX crash in November 2022 in August, according to analysis from asset manager ETC Group, driven by growing US recession fears and a sharp strengthening of the Japanese yen.

However, recession fears quickly transformed into expectations of a change in the Federal Reserve’s monetary policy. If the Fed starts to ease its policy, i.e. lower interest rates or inject more money into the economy, this could create a more favorable environment for Bitcoin, as loose monetary policy typically encourages more risk-taking investments in assets like cryptocurrencies.

According to Andre Dragos, Head of Research at ETC Group:
Expectations were heightened when Fed Chairman Jerome Powell indicated at a meeting in Jackson Hole, Wyoming, that such a policy change was likely imminent. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” the Fed chief said.

According to Dragos, Powell’s comments indicated that the Fed can no longer tolerate worsening labor market conditions and suggests that rate cuts could begin in September.

At the time of writing, Bitcoin is trading at $58,385, down nearly 5% in the last 30 days. However, the asset is still showing a 31% return in 2024.

Recession Risk

ETC Group predicts that concerns about a slowdown in the US will have less of an impact on Bitcoin’s price. According to Dragos’ analysis, the cryptocurrency’s sensitivity to global growth expectations is decreasing and it is becoming more correlated with monetary policy and the performance of the US dollar.
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