Previous price declines indicate a potential crypto bull market catalyst – 21 shares

In his annual Jackson Hole Symposium speech, US Federal Reserve Chairman Jerome Powell sent a strong signal that interest rate cuts are imminent.

The price of Bitcoin (BTC) rose above $63,000 on the news, and analysts think more gains are expected when the Fed starts cutting rates.

Lina Eldib, a researcher at exchange-traded product provider 21Shares, explained that earlier interest rate cuts have been good for the appreciation of digital assets, as investors with access to cheap credit have taken the opportunity to invest in riskier asset classes. In a statement to Cointelegraph, the analyst gave a specific example of a previous price drop at the start of the Covid-19 pandemic:

“In the year While they decreased by 150 basis points (bps) to reach zero in March 2020, the overall crypto market value increased by 450% by the end of the year, and the value of Bitcoin increased by a similar 200%. season”

ElDeeb qualified its statement by explaining that while past performance does not guarantee future results, the March 2020 interest rate cut could provide a benchmark against which to compare the effects of a potential devaluation on crypto markets.

Related: Bitcoin braces for Fed's Powell as $61K BTC price eyes continued split

M2 money supply levels as a market signal

A 21Shares analyst pointed to changes in the M2 money supply — a measure of the total currency circulating in the global economy — as a likely cause of Bitcoin's breakout.

LDB said that the M2 money supply will reach its lowest level several months before the “bottom” before the price of Bitcoin rises rapidly. This rapid rise in prices typically outpaces liquidity growth before pulling back in what the analyst described as a “mid-cycle correction.”

The analyst concluded by sharing her belief that bitcoin exchange-traded funds (ETFs) are a “key catalyst” for price appreciation amid what she described as an M2 money supply cycle.

Institutional interest in digital asset investment vehicles remains high.

In the year Despite $528 million in outflows from digital asset investment products on August 3, institutional demand for digital asset investment remains strong, as evidenced by $20.3 million and $61.3 million inflows into BlackRock's iShares Bitcoin Trust ETF and Fidelity's Wise Origin Bitcoin Fund. , respectively.

This high demand for digital asset investment vehicles is also confirmed by the behavior of investment advisors who increased their exposure to Bitcoin ETFs during the second quarter of 2024.

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