Bitcoin Alone Among Bulls Waiting for the Fed’s Most Important Decision

Bitcoin Alone Among Bulls Waiting for the Fed’s Most Important Decision

BitVerge — What if Bitcoin supporters were told that Western central banks were embarking on a new round of monetary easing , while the S&P 500 and Nasdaq — even with a mild mid-summer panic — were heading toward record highs, U.S. bond yields were falling to multi-year lows, and gold was hitting historic highs? Would that interest them?

While it remains to be seen whether the US Federal Reserve will cut interest rates by 25 or 50 basis points next week, what is certain is that the US central bank will begin its first easing cycle since 2019. In doing so, the Fed will join other major Western central banks – the European Central Bank, the Bank of England, and the Bank of Canada – which have already cut rates, some more than once. While Japan has yet to join in, and has in fact taken tentative steps towards tightening, its key policy rate of 0.25% is only a few basis points above zero.

The reaction in traditional markets was as expected, with stocks, bonds and gold prices rising sharply as the monetary easing campaign in developed markets began to take hold. However, Bitcoin (BTC) has not joined the trend. Despite its rally on Friday, the price remains below $60,000, about 20% below its all-time high above $ 73,500 reached six months ago.

Bitcoin’s Suffering

“You have to broaden your view,” said a prominent observer and analyst CoinDesk spoke to, noting that even with the big pullback since March, Bitcoin is still up more than 40% year-to-date and 127% from year-ago levels. Much of Bitcoin’s underperformance in recent months may just be a breather after an extreme bull run. The cryptocurrency’s performance in 2024 and throughout the year is still outperforming U.S. stocks and gold.

However, the broader outlook may be more frustrating for proponents. Bitcoin is worth much less today than it was three years ago when it hit what was then a record high of $69,000. Taking into account the rapid inflation of the past three years, the performance looks much worse, especially if bitcoin supporters want the currency to serve as a hedge against inflation. The S&P 500 is up about 33% during that period, while gold — described as a “barbarian heritage” — is up more than 50%.

Steno Research notes that Bitcoin hasn’t seen many rate cut cycles — except for the one that began in 2019. The team notes that Bitcoin fell by about 15% between the first Fed rate cut in August and the end of November, when the Fed cut rates by 75 basis points. Bitcoin only began to recover after the massive monetary easing push that began in March 2020, which led to a meteoric rise.

It is likely that a short series of modest interest rate cuts may not have a significant impact on the price of Bitcoin, and that it may take greater action and emergency measures from central banks to ignite a new bull run.