Bitcoin Price Surge: Structural Factors and Rate Cuts Fuel Ongoing Rally
Bitcoin Price Surge – Bitcoin has surged past $105,000 as the broader market anticipates the Federal Reserve’s upcoming interest rate cut. The leading cryptocurrency gained 3.5% over the past 24 hours, reaching a price of $105,004. This marks a continuation of its bullish momentum, which has seen Bitcoin advance by over 140% year-to-date. As the market braces for a potential Federal Reserve rate cut, analysts increasingly view this policy shift as confirmation of Bitcoin’s ongoing rally rather than a primary catalyst driving its price action.
Federal Reserve Rate Cut Expected to Fuel Bitcoin’s Momentum
The Federal Reserve is expected to reduce interest rates by 25 basis points, bringing the range down to 4.25% – 4.50%, at this week’s Federal Open Market Committee (FOMC) meeting. According to CME’s FedWatch Tool, there is a 93.4% probability of this cut, following the rate reduction in November 2024. While such a move would mark the second consecutive cut, Luis Buenaventura, head of crypto at GCash, suggests that the market has already priced in the anticipated reduction. Buenaventura noted that the market has been expecting the cut for weeks, diminishing its impact on Bitcoin’s price trend.
“I don’t believe a Fed rate cut will have any substantial impact on the price trend, as the market has been expecting it for at least a few weeks now,” Buenaventura said in an interview with Decrypt. He pointed to historical data showing that Bitcoin has historically risen by 50% in less than 60 days following a rate cut, followed by an additional 35% gain in the subsequent two months. With Bitcoin already up by 50% in recent weeks, Buenaventura believes the momentum will continue.
Structural Factors Driving Bitcoin’s Rise Beyond Rate Cuts
Beyond the Federal Reserve’s monetary policy, analysts also highlight structural factors that are driving Bitcoin’s price. The recent appointment of David Sacks, former PayPal COO, as the White House AI & Crypto Czar, along with proposals for a Crypto Advisory Council, signals growing institutional interest in the crypto space. These macroeconomic factors are seen as contributing to the demand for Bitcoin, especially as investors seek alternatives to traditional assets in a low-rate environment.
“These structural changes signal that more institutional players are engaging with crypto, which in turn supports Bitcoin’s rise,” said Neal Wen, head of Global BD at Kronos Research. Wen further explained that Bitcoin has historically benefited from such shifts in the broader economy, as investors look to digital assets during periods of low interest rates.
Bitcoin Breaks $105,000 with Strong Yearly Gains
Bitcoin’s rise above $105,000 comes on the heels of its 145% year-to-date gain, bolstered by a 50% price increase since the U.S. presidential election. The broader crypto market has mirrored Bitcoin’s upward momentum, with Ether (ETH) reclaiming the $4,000 level, sitting approximately 17% below its November 2021 all-time high.
Rate Cuts Already Priced In – Minimal Impact on Bitcoin’s Price
While analysts agree that a rate cut would generally benefit Bitcoin’s price, many believe that the market has already priced in the 25 basis point reduction. According to Min Jung, a research analyst at Presto Labs, the market has factored in this expected cut, and its direct impact on Bitcoin’s price will likely be minimal.
“While a rate cut is undoubtedly favorable for Bitcoin’s price, the market appears to have already priced in a 25 basis point cut in December,” Jung told Decrypt. “As a result, the actual rate cut may have minimal direct impact on Bitcoin’s price.”
Bitcoin’s Trajectory to Rely More on Market Structure and Institutional Engagement
As the Federal Reserve prepares for its announcement, traders are now focusing more on technical indicators and adoption metrics than on rate policy alone. This shift suggests that Bitcoin’s trajectory may depend more on market structure and institutional engagement than on traditional monetary factors.
“The focus will shift to the December FOMC meeting’s Summary of Economic Projections (the dot plot) and comments from Powell regarding future rate cuts,” Jung explained. “These factors, particularly any unexpected developments or surprises, will likely be the key drivers of Bitcoin’s price action going forward.”
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
Leave a comment