Fed Rate Cut Fuel On The Fire For Bitcoin Price Momentum

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As a seasoned researcher with a knack for deciphering market trends, I must say that the recent monetary policy moves by the US Federal Reserve have caught my attention. With over two decades of experience under my belt, I’ve witnessed many economic cycles and their impact on various asset classes.

After the U.S. Federal Reserve announced a 25 basis point reduction in its key interest rate, bringing it down to 4.75%-4.5%, markets experienced additional encouragement. This move represents another effort towards easing the nation’s monetary policy. The decrease was as anticipated by the market and did not cause significant price fluctuations like the Trump presidency did.

Last Thursday’s move is a continuation of a significant decision taken during the most recent Federal Reserve meeting. Specifically, on September 18th, 2024, the U.S. Federal Reserve disclosed plans to decrease rates for the first time in four years by implementing a reduction of 50 basis points.

Before these reductions, US interest rates had been quite high, with the Federal Reserve’s target rate being above 5% since May 2023 as a means to combat escalating inflation following the pandemic. Lowering interest rates makes capital more affordable and increases the money supply. This shift in monetary policy encourages investors to favor investment and consumption over saving.

Last week, JP Morgan Chase predicted that investors should take notice of Gold and Bitcoin following Trump’s victory, as a weaker US dollar may result from a more lenient monetary policy. The bank elaborated, stating that individual investors are increasingly adopting the ‘dilution strategy’ by purchasing Bitcoin and gold-related exchange-traded funds (ETFs).

When engaging in a debasement trade strategy, the aim is to maintain or increase wealth by exploiting favorable opportunities. If U.S. inflation were to rise once more due to falling interest rates, it suggests that investors are leaning towards gold and Bitcoin, as they possess characteristics of hard money that make them attractive in high-inflation environments.

On November 7th, following Trump’s election victory, there was a significant surge in daily Bitcoin ETF inflows from the U.S., totaling approximately $1.38 billion – the highest single-day net inflow for BTC ETFs in 2024.

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2024-11-11 12:54