Bitcoin Could See More Capital Inflow if the Fed Pauses Rates
Analysts suggest that if the U.S. Federal Reserve decides to pause rates at its upcoming meeting on December 13, Bitcoin could experience an increase in capital inflow. According to Bitfinex analysts, there is anticipation of a rate pause based on recent statements made by Federal Reserve Governor Christopher Waller. The analysts believe that such a pause could lead to more capital flowing into risk assets like Bitcoin. Waller mentioned in a speech earlier this week that the easing of the U.S. economy’s pace aligns with the Fed’s inflation goal, indicating a high probability of a rate pause.
Optimism Among Analysts
Waller’s comments, along with CME FedWatch’s prediction of a 95% chance of a rate pause in December, have fostered optimism among analysts. Waller expressed confidence in the current monetary policy’s ability to slow the economy and bring inflation back to 2%. He was encouraged by the October consumer price index inflation reading, which showed no inflation for the month and broadly distributed moderation in prices. However, Bitfinex analysts caution that while a rate pause might boost Bitcoin in the short term, its long-term impact depends on various economic factors and overall monetary policy direction.
Potential Fed Rate Cuts in 2024
Investors are eagerly awaiting the next Federal Reserve rate announcement and paying close attention to signals about possible rate cuts in 2024 during Fed Chair Jerome Powell’s press conference. Bitfinex analysts highlight indications that the market expects rate cuts to begin in spring 2024. This anticipation has already influenced bond yields and trader expectations, with rate cuts being priced in from May 2024 onwards. The analysts believe that this shift in monetary policy could create a more favorable environment for investment in risk assets, including cryptocurrencies, leading to a sustained long-term price increase.
Hot Take: Bitcoin’s Potential Upside with Fed Rate Pause
The anticipation of a rate pause by the U.S. Federal Reserve has sparked optimism among analysts regarding Bitcoin’s potential upside. If the Fed decides to pause rates at its upcoming meeting, there is a possibility of increased capital inflow into the cryptocurrency. Federal Reserve Governor Christopher Waller’s statements and the market’s anticipation of rate cuts in 2024 have contributed to this positive sentiment. However, it is important to consider that the long-term impact on Bitcoin will depend on economic factors and the overall direction of monetary policy. Nevertheless, a rate pause could create a more favorable environment for investment in risk assets like Bitcoin.
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