- Bitcoin reached a new intraday high of $42,476 on the Bitstamp exchange.
- The surge is attributed to the Federal Reserve’s decision to keep rates steady and predictions of potential rate cuts in 2022.
Bitcoin has experienced a remarkable surge, reaching a new intraday high of $42,476 on the Bitstamp exchange. This surge comes as a welcome relief for traders following a recent selling streak.
The catalyst behind this rally can be attributed to the Federal Reserve’s decision to maintain current interest rates while forecasting possible rate cuts in the upcoming year. Historically, Bitcoin has thrived in environments characterized by lower interest rates. Lower rates tend to reduce the yield on government securities, making alternative investments such as cryptocurrencies more enticing.
Rate Cut Expectations
The Federal Reserve’s recent announcements have left a significant imprint on financial markets. Rate futures now suggest a greater than 60% likelihood of a rate cut in March 2024. Additionally, there has been an immediate uptick in U.S. interest rate futures, indicating a 90% probability of a rate cut in May, up from 80%. These developments reflect a growing expectation of more accommodative monetary policy in the near future, potentially fueling further growth in risk assets like Bitcoin.
In parallel with Bitcoin’s ascent, spot gold prices have also seen an increase, rising by 0.7%. This uptick in gold prices is a direct response to the Federal Reserve’s decisions. Gold is traditionally viewed as a hedge against inflation and currency devaluation. With the Fed signalling potential rate cuts and lower inflation projections, investors are turning to gold as a safe haven.
The Federal Reserve’s projections include a core inflation rate of 3.2% by the end of 2023, gradually decreasing to 2.0% by the end of 2026, accompanied by a gradual slowdown in GDP growth.
