Bitcoin Predicted to Reach New Highs by Year-End Amid Interest Rate Cuts
With the initiation of the interest rate cut cycle in the United States, hopes for a soft landing have increased, leading to historic highs in the S&P 500 and Dow Jones Industrial Average (DOW). Yesterday, Bitcoin briefly reached $63,850, while Ethereum also saw a resurgence, nearing $2,500. Standard Chartered Bank believes that following the Federal Reserve’s decision to cut rates by 50 basis points, there is potential for continued upliftment in the broader digital asset market. (Federal Reserve Cuts Rates! Inflation Nearing Target, Focus Shifts to Achieving Soft Landing)
US Federal Reserve Officially Initiates Rate Cuts
The US Federal Reserve officially kicked off the rate cut cycle by lowering the federal funds rate by 2 basis points to 4.75%-5%, with expectations of a further 0.5% decrease by the end of the year. Yesterday, the stock market, gold, and cryptocurrencies all performed well driven by the market sentiment.
According to Geoff Kendrick, Director of Foreign Exchange and Digital Assets Research at Standard Chartered, regardless of the outcome of the November US presidential election, macroeconomic factors will drive the prices of digital assets higher.
Following the FOMC meeting, digital assets have for the first time taken a leading position in performance, a first in a considerable period of time. Despite today’s Polymarket showing a lead for Biden by 52/47, Kendrick attributes this positive performance to macroeconomic drivers beginning to overshadow election-related uncertainties.
While the US election is crucial, macro drivers are starting to take precedence. Kendrick is monitoring the difference between short-term and long-term US Treasury yields as an indicator of market conditions favorable to digital assets.
I observe the US 2s10s curve, the steepening of the US yield curve being favorable for digital assets. Since July 2022, the spread between these two bond yields has been negative (short-term bond yields higher than long-term bond yields, also known as “inversion”). The market believes this signals an impending economic recession. However, the spread began to normalize again at the end of August. (Inversion of Yield Curve Coming to an End! Can It Drive Cryptocurrency Rally?)
The investment in Bitcoin spot ETFs could also contribute to supporting Bitcoin prices. Kendrick reiterated his previous prediction that Bitcoin will reach new all-time highs by the end of this year, with a potential target of $125,000 if Trump wins and $75,000 if Biden wins.
Interest Rate Cuts to Boost Digital Asset Trends
Observing the yield curve and Bitcoin ETF flows
Bitcoin forecasted to hit new highs by year-end
