Loser Fed Policy, Global Macro Trends Point to Optimism for Bitcoin – Analysts
The bullish environment that dominated the crypto markets in early August may have set the stage for a “tactical bottom for Bitcoin,” supported by expectations of loose monetary policy in the United States.
According to an analysis by asset manager ETC Group, sentiment fell to its lowest level in August since the fall in FTX, amid growing concerns about a recession in the US and a sudden appreciation of the Japanese yen.
But fears of a recession quickly turned into expectations of a reversal of monetary policy by the Federal Reserve. If the Fed starts to ease policy, meaning it lowers interest rates or injects more money into the economy, it could create a more favorable environment for Bitcoin (BTC), as easy monetary policy generally encourages more exposure and investment in assets like cryptocurrencies. .
Andre Dragoš, head of research at ETC Group, said:
“[…] We believe that the combination of macro and crypto sentiment capital at the beginning of August probably marked a significant tactical bottom in Bitcoin and thus marked the beginning of a renewed bull run.
Speculation was reinforced when Fed Chairman Jerome Powell signaled at a meeting in Jackson Hole, Wyoming, that such a reversal was inevitable. “The direction of travel is clear, and the time and speed of the rate reduction is based on income data, evolution and balance of risks,” said the Chairman of the Federation.
Macro factors drive partial Rˆ2 to Bitcoin. Source: Bloomberg/ETC Group
According to Dragoš, Powell's comments signaled that the Fed could no longer tolerate worsening labor market conditions and suggested rate cuts starting in September.
“Our market-based measure of monetary policy expectations is now clearly showing positive expectations for monetary policy. This is likely to provide a positive tailwind for Bitcoin and other crypto assets next month.”
At the time of this writing, the price of Bitcoin is $58,385, down 5% over the past 30 days. By 2024, however, the asset will still see a 31% return.
The threat of economic collapse
The threat of an economic slowdown in the US is unlikely to affect the price of Bitcoin, according to the forecast ETC Group. According to Dragosh's analysis, the cryptocurrency's sensitivity to declining global growth prospects is linked to monetary policy and the performance of the US dollar.
“Our macro factor model shows that less of Bitcoin's performance over the past 120 days is explained by changes in global growth estimates (which are headwinds) and more by other macro factors such as monetary policy expectations or the US dollar (which provide tailwinds).”
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