The price of Bitcoin (^BTCUSD) today rose to $44,444.84, the highest in 19 months. The world’s largest digital asset has rallied +16% over the past week and is up +168% this year. The latest leg higher in Bitcoin was driven by speculation of interest rate cuts in Q1 of next year by the Federal Reserve and the European Central Bank.
The price of Bitcoin is also being underpinned by speculation the U.S. may be close to allowing its first spot Bitcoin exchange-traded funds (ETFs)
In June, BlackRock Inc. filed with the Securities and Exchange Commission to launch a spot Bitcoin ETF, suggesting crypto could soon gain broader appeal as an asset class. IG Australia Pty said the recent high volatility and “jet-fueled” move up in Bitcoin is instead a reminder that crypto is “more responsive to a Fed pivot and policy than other asset classes.” The markets are discounting a 76% chance for a -25 bp rate cut by the Fed at the March 19-20, 2024, FOMC meeting. Also, the markets have priced in an 86% chance that the ECB will reduce its benchmark rate by -25 bp at its March 7 meeting.
Another bullish factor for Bitcoin is the so-called Bitcoin halving due next year, which will cut in half the number of tokens that Bitcoin miners receive as a reward for their work and thus trim supply growth. The quadrennial event is part of the process of capping Bitcoin supply at 21 million tokens. After the last three halving events, the price of Bitcoin rose to record highs.
Bitcoin’s correlations with stocks and gold have ebbed this year as crypto-specific factors have fueled this year’s surge in cryptocurrency prices. A 90-day correlation coefficient for Bitcoin and MXCI’s index of world stocks has dropped to 0.18 from 0.60 at the start of the year. A similar study for Bitcoin and spot gold prices shows the coefficient has declined to 0 from 0.36. A reading of 1 indicates the assets are moving in lockstep, while minus one would show they’re moving in opposite directions. A reading of zero indicates no correlation between the two assets over the time period measured.
Bitcoin is also receiving support from hopes that the worst of the U.S. crackdown on cryptocurrencies is over. Token Bay Capital said, “The feeling is the U.S. authorities and regulators have really had their say, and we could see more dialog happening with regulators.”
Grayscale Investments LLC said, “Both micro and macro factors are currently lining up for Bitcoin.” Researcher Kaiko said whether the rally in Bitcoin lasts will “surely become clearer once a decision is reached on the spot ETF.”
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
