Correlating Bitcoin’s rally & the Fed’s dot plot
This week is a major reckoning for cryptocurrency investors…..it will set the tone for the futures trading activity as leading central banks across the globe unveil future course of action with respect to interest rate movement….
The recent surge in prices of various risky assets….particularly the virtual digital assets or VDA’s…such as Bitcoin, Ethereum, Binance, Solana….etc have captured the investor imagination…
The optimism is already bolstered by rising prices of cryptocurrencies…for instance the Bitcoin (BTC) price surged 12% in last 30 days, and is up 150% year-to-date, largely driven by hopes of several spot BTC exchange-traded funds (ETFs) approval by the U.S. Securities and Exchange Commission (SEC), which will result in increased participation of large institutions.
Further, the recent spate of macro data has peddled the narrative of the U.S. central bank – the Federal Reserve may embark upon withdrawing from the current tighter monetary policy…which means,…for the benefit of laymen, the central bank would start rolling back the recent spate of rate hikes….
Experts are expecting the Fed to start reversing rate-hike from as early as March 24….that’s one of the reason behind the rally in Bitcoin, Ether and other protocols….
Later today..i.e.Tuesday December 12th, 2023, the meeting of the Federal Reserve Open Markets Committee will commence to decide whether to keep the federal funds rate elevated or change it.
Speaking on Bloomberg Wall Street Week on Friday, PIMCO Multi-Asset Strategies Portfolio Manager Erin Browne aired his view, highlighting the fact that the reduction in US jobs numbers may encourage Fed to portend rate cuts in the fourth quarter.
Countering PIMCO’s views is an analyst at Goldman Sachs. The investment banker has brought forward its estimate for the Federal Reserve’s first interest-rate cut to third-quarter 2024 from a previous forecast of the fourth quarter.
The Fed’s benchmark interest rate is currently 5.25% to 5.5%, with traders of the Fed funds futures anticipating a decline to a range starting at 4% by the end of the next year.
When interest rates drop, borrowing becomes cheaper, spurring risk-taking in the economy and financial markets, including cryptocurrencies.
But considering the diverse views of the experts, ….. It’s time to uncork the bubbly yet.
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