Bitcoin (BTC), the world’s largest cryptocurrency, is currently on a bullish momentum as it breached the psychologically important level above $61,000. With changing global macroeconomic trends, here are three reasons why BTC prices may climb toward $70,000 soon.
The Fed Rate Cut on Bitcoin
The Federal Reserve’s decision to cut interest rates remains a major factor that could push Bitcoin towards $70,000. The US and global financial ecosystem have faced inflation uncertainty in recent years. Central bank responses, such as the Federal Reserve rate hikes, have also fueled the uncertainties.
The Federal Reserve was forced to implement rate hikes to curb inflation associated with the outbreak of the COVID-19 pandemic. The Fed had a priority to keep inflation close to 2%, a level it believes can help the masses.
There are now indications of improvement in the economy following a slew of interest rate increases to combat inflation over the past few years. This milder inflation is evident in the recently released US economic data, signaling the readiness to cut interest rates.
Market experts estimated a September timeline for a possible rate cut. Notably, the speech from Fed Chairman Jerome Powell at the Jackson Hole Summit on August 23 confirmed the speculations. “We do not seek or welcome further cooling in labor market conditions. The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell noted.
An eventual rate cut will send massive cash into circulation, ultimately devaluing the dollar in the short term. This is a positive twist that might benefit Bitcoin. If this scenario plays out, BTC’s hedge and store of value status can draw more people to adopt it.
Boost in Tech Stocks
When interest rates rise, companies usually find it expensive to raise capital. For instance, they will have to pay higher interest rates on the bonds they issue. Due to rising interest rates, expectations for future profits may be revised lower.
Consequently, a possible US Fed rate cut might provide a lasting boost to tech stocks. Top AI companies like NVIDIA may lock in their remarkable valuations as a key confluence between the stock market and the crypto industry.
Cryptocurrencies are generally highly correlated to stocks, bonds, and commodities. Thus, prices or valuations tend to follow the same path. If the stock market rallies on an expected rate hike, Bitcoin’s price might rise to $70,000.
Increased Attention on Bitcoin ETFs
Legacy financial products usually lose their appeal as interest rates fall. This clears the way for the spot Bitcoin ETFs to shine. This investment vehicle tracks Bitcoin’s price, allowing investors to gain exposure in a regulated way.
Over time, Bitcoin has demonstrated its superiority over the S&P 500 and other Treasury Bills. Thus, spending will grow substantially if the Fed rate cut pulls through. As a result, inflation will pick up steam and make Bitcoin a more appealing hedge.
As reported earlier, mainstream firms like the State of Wisconsin Investment Board (SWIB) and Morgan Stanley are already hedging their bets with BTC. Over time, the number will rise
According to the latest market data, the BTC price was $61,617, up 1.7% in 24 hours and 5.8% in the last seven days. Trading volume, however, declined by 31.9% to $24 billion, while the market capitalization stands at $1.2 trillion.
