Bitcoin Posts Uptick Above $43,000 as Markets Anticipate Fed Rate Cut
Bitcoin saw an increase in price on Monday, surpassing the $43,000 mark. This rise comes as the market awaits the beginning of the U.S. central bank’s rate-cutting cycle at May’s Federal Open Market Committee (FOMC) meeting.
Bitcoin’s Price Movement
The world’s largest cryptocurrency by market capitalization rose by over 0.5% in the past 24 hours, reaching $43,100 at 7:30 a.m. ET.
Expectations of Fed Rate-Cutting Cycle
Market participants anticipate that the Federal Reserve will start its rate-cutting cycle in May based on current Fed funds futures pricing.
Fed Funds Futures Contracts
Fed funds futures contracts represent the market’s predictions for future interest rates. Investors use these contracts to express their opinions on interest rate direction and manage interest rate risk in their portfolios.
Powell’s Statement on Rate Cut
Federal Reserve Chairman Jerome Powell stated that a rate cut in March is unlikely to happen as the committee wants to be more confident that inflation is moving down to 2%. He emphasized that it is not likely that the committee will reach that level of confidence by the March meeting.
Regional Bank Stresses and Potential Rate Cuts
Higher for longer rates and recent U.S. job numbers could potentially increase the probability of an earlier rate cut. An increase in systemic risks within the banking system or a significant rise in unemployment could trigger a reversal in monetary policy.
Crypto Market Reaction to Rate Cut Delay
The delay in the rate cut until May could initially lead to a sell-off in bitcoin and other cryptocurrencies. This may be due to declining global growth expectations and the possibility of a U.S. recession. However, a reversal in monetary policy in May, along with a weak U.S. dollar, could provide a significant boost.
Mixed Indicators in U.S. Jobs Numbers
While Friday’s U.S. employment report showed the addition of 353,000 jobs, indicating a robust economy, closer examination reveals declining indicators such as average hours worked, which are typically associated with a recession. High-frequency indicators like Google search queries for “filing for unemployment” also suggest weakness in the U.S. labor market.
Hot Take: Bitcoin Reacts to Anticipated Fed Rate Cut
Bitcoin’s recent price increase above $43,000 reflects market anticipation of the Federal Reserve’s rate-cutting cycle beginning in May. However, delays in rate cuts and mixed indicators in the U.S. jobs numbers could impact the crypto market. While initial sell-offs may occur due to declining global growth expectations and a potential recession, a reversal in monetary policy and a weak U.S. dollar could provide significant support for bitcoin and other cryptocurrencies.
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