Bitcoin reached close to its highest point in a month on Monday, extending last week’s gains driven by the US Federal Reserve’s decision to lower its benchmark interest rate.
The cryptocurrency traded just shy of $64,000, up 2% on the day, according to CoinGecko data. This marked its highest level since late August.
The Fed’s 50 basis point rate cut on Wednesday exceeded expectations, as many economists had anticipated a more modest 25 basis point reduction. This was the first time in four years the Fed reduced rates, a move seen by some analysts as a significant boost for risk assets, including cryptocurrencies.
“Crypto is fundamentally a risk-on asset class, so lower interest rates act as a bullish catalyst,” said Matthew Graham, managing partner at Ryze Labs.
For Bitcoin, a key market indicator, the rate cut has provided momentum, although the cryptocurrency has yet to reclaim its March all-time high of over $73,800.
While Bitcoin has rallied, analysts caution that the surge may not continue at the same pace. QCP Capital, a Singapore-based digital asset trading firm, noted in a recent investor note that the initial enthusiasm following the Fed’s rate cut is likely to fade, and crypto prices may “take a breather.” A recent dip in Bitcoin’s price volatility suggests traders are expecting less dramatic short-term movements.
The broader macroeconomic environment also contributes to this cautious sentiment. While the US Federal Reserve has started lowering interest rates, other central banks like the Bank of Japan and the Bank of England are adopting more cautious approaches, either holding rates steady or slowing the pace of cuts. These divergent policies create uncertainty, which could affect liquidity and capital flow into cryptocurrencies, often resulting in market volatility.
Nonetheless, many analysts remain optimistic about Bitcoin’s outlook for the remainder of the year. Some traders predict the cryptocurrency could rise to $85,000, with the possibility of continued upward momentum in the fourth quarter if macroeconomic conditions remain favorable. However, the market’s performance is closely tied to the Fed’s actions, with future rate cuts potentially providing further support for Bitcoin and other risk assets.
With input from Decrypt, Reuters, and Cointelegraph.
