Bitcoin has rocketed following the latest inflation data that showed price pressures easing (while traders brace for bitcoin’s ultimate catalyst).
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The bitcoin price has surged toward $65,000 per bitcoin, up from under $60,000 earlier this month, as bitcoin is seen going “parabolic” in the months ahead.
Now, as a tiny cryptocurrency could be about to rocket 50-fold, creating “generational wealth,” the Federal Reserve could be about to throw “rocket fuel” on the bitcoin price with a surprise interest rate cut.
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Federal Reserve chair Kevin Warsh could be about to surprise markets and send the bitcoin price soaring.
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“So what if the next Fed move isn’t a hike at all, but a cut,” Nic Puckrin, markets expert and former Goldman Sachs analyst, said in emailed comments. “That’s a scenario the markets aren’t pricing in, and it would be rocket fuel for investors’ already unstoppable exuberance.”
The market is still overwhelmingly betting that the next move by the Fed will be an interest rate hike, possibly as soon as its September meeting—something that could cause investors to quit bitcoin and crypto just as the Fed also tries to shrink its balance sheet, further sucking liquidity out of the system.
Puckrin pointed to the new Fed chair Kevin Warsh’s preference for “trimmed mean” personal consumption expenditures (PCE), which “is sitting at just 2.4%,” has a reason for why Warsh could opt for a cut rather than a hike.
However, Warsh has promised to “get monetary policy right” and defeat the inflation, declaring “we are at a hinge point in history” and that recent price pressures could become a thing of the past as technology powers the economy to unprecedented growth.
“The Fed’s number one objective is to get monetary policy right—or as near to it as we possibly can,” Warsh said in his prepared remarks to U.S. lawmakers on the House financial services committee then the Senate banking committee. “That is our clear and constant aim, the star we steer by. And if we get policy right—and we will—the inflation surge of the last five years will be a thing of the past.”
Warsh said the economy “is expanding at a solid pace, showing resilience in the face of recent developments,” and the “rapid pace [of technological investment] … appears to be accelerating.”
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The bitcoin price has crashed by more than 50% since hitting its all-time high in October last year.
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Either way, bitcoin and crypto investors are for now breathing a sigh of relief.
“The hawks can stand down for now,” Stephen Coltman, head of macro at 21shares, said in an emailed note, pointing to comments from a Fed official this week that suggested a rate hike could be imminent.
“Markets were nervous in the wake of [Federal Reserve governor Christopher] Waller’s comments yesterday explicitly citing today’s CPI print as an important data point for a finely balanced Fed rate decision later this month, and markets will be hugely relieved to see both headline and core come in well below expectations.”