The Bank of England announced an interest rate cut of 0.25%, down to the 5% mark. This concludes one of the longest periods of heightened interest rates.
In an August 1st X post, the Bank of England announced the move to reduce interest rates. The ease was primarily driven by inflation, after it saw a monumental decline from 8% to 2% over the past year.
The Monetary Policy Committee voted by a majority of 5-4 to reduce #BankRate to 5%. Find out more: https://t.co/zBZeLlwSxD pic.twitter.com/YOcCTfER5o
— Bank of England (@bankofengland) August 1, 2024
This cut marks the bank’s first interest rate reduction in over four years, with the last cut occurring in March 2020.
The Bitcoin price could benefit from the surprise rate cut, as economists were divided on whether the bank would cut or hold rates steady.
While there may be room for a further ease below 5% later this year, possibly in November, the Bank of England governor wants to avoid cutting “too quickly or by too much.”
Notably, inflation is expected to creep back up from the target of 2% over the next few months.
Easing monetary policy has historically boosted risk on assets like Bitcoin and Gold, yet Bitcoin price remains range-bound.
US Monetary Policy is the Real Kicker
The Bitcoin price remains subdued below the $65,000 mark despite the UK’s first rate cut in over four years.
The sluggish price action could be attributed to the United States Federal Reserve’s decision to hold its key lending rates steady in August.
However, Bitcoin price could see significant new liquidity and upward momentum with a US rate cut in September
According to CME’s FedWatch tool, traders hold an 86.5% chance that the central bank will lower its rate to 5.00% – 5.25% in September, down from the current 5.25% – 5.50%.
This follows Federal Reserve Chair Jerome Powell’s comments on Wednesday, which indicated a potential rate cut coming as soon as September.
Volatility Alert 🚨#FOMC meeting today at 11:30 PM IST
Everyone is waiting for the Fed's decision and hints about future rate cuts.
But it is expected that there will be no rate cuts. Current rate is 5.5%. pic.twitter.com/HrHk7FWWkk
— Rananjay Singh (@TodayCryptoRj) July 31, 2024
Powell stressed that they need strong economic data before considering making borrowing easier again. The central bank kept its main interest rate unchanged at 5.25%-5.50% in August, as expected.
However, Powell’s comments and the Fed’s stance indicate that a rate cut in September isn’t guaranteed. Instead, “it’s just a question of seeing more good data” on inflation and the job market.
The recent ADP report indicated slower job growth, with only 122,000 new jobs added in July, falling short of the expected 150,000.
Additionally, annual pay increased by 4.8%. This weak data and a significant drop in 10-year U.S. bond yields, reflecting decreased confidence in future economic growth, reinforce expectations for a rate cut.
Crypto Whales Are Scooping Up Bitcoin
Despite the relative uncertainty surrounding further cuts, recent Bitcoin whale accumulation displays confidence.
Large Bitcoin holders, or addresses owning at least 0.1% of BTC’s circulating supply, accumulated over 84,000 BTC in July, valued at over $5.4 Billion.
The move represented the highest since October 2014, when Bitcoin reached 11-month lows.
Similarly, last month’s accumulation was driven by bargain-hunting during the early July price dip below $55,000 and brief pauses during the recovery to $69,000.
This strategic accumulation shows a strong belief that the prolonged consolidation phase between $50,000 and $70,000 will eventually end with a bullish breakout.
This sets an interesting precedent for price action in the coming months, highlighting high-potential investment opportunities.