As a seasoned crypto investor with a decade-long journey under my belt, I find myself standing at the precipice of both excitement and caution as we witness this latest surge in Bitcoin’s price. The convergence of bullish trends across traditional markets, gold, and cryptocurrencies is nothing short of remarkable, reminding me of the dot-com boom days when I first ventured into tech stocks.
On a Friday, cryptocurrencies experienced a significant increase, with Bitcoin (BTC) approaching the $60,000 mark, thanks to strong growth in conventional market sectors.
The price increase happened at the same time as an uptick in U.S. stock prices. Just before closing, the S&P 500 almost reached its July peak record, being less than 1% away. Gold broke its own records, surpassing $2,600 per ounce for the first time ever. Moreover, a decrease in the value of the U.S. dollar against significant currencies boosted rallies across various investment types.
The Fed Will Cut Rates, Finally
Next week’s noteworthy occurrence is the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday. This gathering could potentially signify the first interest rate adjustment by the Federal Reserve since 2020. Predictions about the size of this adjustment remain varied, with nearly equal chances suggested by experts for a quarter-point decrease (25 basis points) and a more substantial half-point reduction (50 basis points), as indicated by the CME FedWatch Tool.
Initially, it appeared almost certain that the U.S. Federal Reserve would reduce its key interest rate by 0.25% at the start of the week. However, this prediction has dramatically changed. While the strong job market shown in last week’s August employment report and higher-than-expected inflation rates from this week’s CPI and PPI reports might suggest otherwise, a recent news article has caused a shift in the Fed’s decision-making process.
Wall Street Journal journalist Nick Timiraos, also known as “Nikileaks” because of his reliable contacts within the Federal Reserve, published an article on Thursday afternoon indicating that discussions regarding the size of the interest rate reduction were ongoing.
Should he make a modest reduction or go for a significant one?” Both possibilities are reportedly being seriously considered.
After reading the article, there’s a significantly higher likelihood, currently at approximately 45%, that the Federal Reserve will reduce interest rates by half a percentage point next week. This prediction is based on data from CME FedWatch, which monitors positions in short-term market interest rates. Just a few days ago, these odds were in the high teens.
The news could have played a role in the swift recovery of the U.S. stock market on Thursday, ending the day with positive returns despite initial losses. Moreover, the value of Bitcoin reached approximately $58,500 – its highest point in over a week.
Generally speaking, looser monetary policies tend to be favorable for risky assets like Bitcoin. But during Bitcoin’s current downturn, these assumptions can easily shift. Some financial experts propose that if the Federal Reserve increases the pace of interest rate decreases – a move that might indicate economic distress – it could potentially push prices down even further.
Despite some ambiguity about whether the Federal Reserve will reduce its key borrowing rate by 0.25% or 0.5% next week, it’s clear that the U.S. central bank is preparing to start reducing interest rates for the first time since 2019. This move aligns with similar actions taken by other significant Western banks such as the European Central Bank, the Bank of England, and the Bank of Canada, all of which have already lowered their rates, some multiple times. Japan, however, hasn’t followed suit yet but its interest rate, at 0.25%, is almost at the zero level.
MicroStrategy Doubles Down
As a researcher, I’m excited to share that MicroStrategy (MSTR) has expanded its substantial Bitcoin holdings by acquiring 18,300 Bitcoins (BTC). This latest purchase was made at an average price of approximately $60,408 per token, as announced by Executive Chairman Michael Saylor in a post on Friday morning. This addition brings MicroStrategy’s total Bitcoin holdings to a staggering 244,800 BTC. The company’s total investment in these Bitcoins amounts to around $9.45 billion, which equates to an average price of $38,585 per Bitcoin. At the current market price hovering just under $58,000, MicroStrategy’s Bitcoin stash is now valued at roughly $14 billion.
Saylor added that the company’s bitcoin investments have provided a return of 4.4% this quarter and 17% since the start of the year. The term “BTC yield” is a measurement created by MicroStrategy, representing the change in percentage over a specified timeframe between the company’s bitcoin holdings and its estimated diluted shares outstanding. MicroStrategy initiated buying bitcoin in 2020 and has consistently expanded its investments since then. According to BitcoinTreasuries, it holds more bitcoin than any other publicly traded company globally.
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2024-09-13 23:28