The Bitcoin price surged to a new two-week high on Friday exceeding $62,000 following Fed Chair Jerome Powell’s Jackson Hole speech. During his address, Powell hinted at a potential series of rate cuts by the world’s largest central bank.
SUMMARY OF FED CHAIR POWELL'S REMARKS (8/23/24):
1. "The time has come for Fed policy to adjust"
2. Fed "will do everything" to support a strong labor market
3. Fed does not welcome further weakening of the labor market
4. Confidence has grown that inflation is heading to 2%…
— The Kobeissi Letter (@KobeissiLetter) August 23, 2024
This dovish stance triggered a reaction across various financial markets. US bond yields saw modest declines, and the US Dollar Index (DXY) hit fresh yearly lows under 101.00.
Meanwhile, US equity markets celebrated the potential for lower interest rates and a Fed prioritizing economic support over aggressive inflation control.
The S&P 500 climbed back above 5,600, within striking distance of its record highs.
Gold (XAUUSD) also approached its record highs above $2,500 per ounce, and cryptocurrencies were mostly in the green.
September’s Fed meeting is now expected to mark the start of a long await policy reversal after the aggressive rate hikes implemented throughout 2022 and 2023 to combat the post-pandemic surge in inflation.
As the Fed eases its policies, declining interest rates will likely increase liquidity in financial markets and the broader economy.
This shift will push investors towards riskier assets such as stocks, Bitcoin, and other cryptocurrencies, as lower risk-free interest rates (like those found in US bonds) diminish their appeal.
This correlation explains why the Bitcoin price has long had a positive correlation to easing liquidity conditions.
BTC Back to $70K? Here’s Where the Bitcoin Price is Headed Next
The Bitcoin price has pulled back from intra-day highs recently and was last trading just under $60,000.
Despite this, the potential for Bitcoin to retest July’s highs around $70,000 remains a strong possibility.
This is particularly true as the first Fed rate cut approaches, further bolstering the positive impact of increased liquidity on BTC.
The upcoming US Presidential election adds another layer of intrigue. Although reports indicate that Democrat nominee and current VP Kamala Harris might adopt a crypto-friendly stance if elected, a stark contrast to the current Biden administration, a Trump victory is generally perceived as more favorable within the crypto community.
Should his lead widen, this could provide another near-term tailwind for Bitcoin.
Beyond the immediate political landscape, longer-term supply dynamics also suggest potential strength for Bitcoin.
The surge in post-halving miner selling is expected to subside soon, further easing supply pressures. This, combined with the successful completion of major sell events like the return of over 200,000 BTC to MT Gox creditors, creates a more optimistic outlook for Bitcoin.
Additionally, the availability of Bitcoin ETFs in the US suggests that as bullish narratives grow, buy pressure could easily soon overpower sell pressure.
As Bitcoin attempts to break out of its current pennant structure and surpass its 50 and 200-day moving averages, a return to $70,000 appears increasingly plausible.
Looking further ahead, Bitcoin seems well-positioned to potentially reach $100,000 by late 2024 or 2025.