Bitcoin and crypto have rocketed higher this week, climbing as the market bounces back to $4 trillion from a sell-off that sparked fears of a crash.
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The bitcoin price hit an all-time high of $123,000 per bitcoin last month, with traders betting the world’s largest asset manager BlackRock could be about to blow up up the market.
Now, as legendary billionaire Ray Dalio issues a shock crypto recommendation, analysts with JPMorgan have flipped to predict the Federal Reserve will cut interest rates in September—setting up a situation “eerily similar” to bitcoin’s 2024 second half price surge.
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U.S. Federal Reserve chair Jerome Powell has come under pressure to cut interest rates, something that could push the bitcoin price higher.
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“For [Fed chair Jerome] Powell, the risk management considerations at the next meeting may go beyond balancing employment and inflation risks,” JPMorgan analyst Michael Feroli wrote in a note to clients seen by Reuters.
JPMorgan predicts the Fed will cut interest rates by 25 basis points at its September meeting, pointing to labour market growth stalling and U.S. president Donald Trump’s nomination of the dovish chair of the Council of Economic Advisers, Stephen Miran, to a temporary seat on the Fed board, replacing outgoing governor Adriana Kugler.
Powell has come under massive pressure from Trump this year, whose attacks over interest rates have raised the possibility that the era of Fed independence could be coming to an end.
“In the off chance Miran is governor by the time of the next meeting, that could imply three dissents. That’s a lot of dissents,” Feroli said, adding that if the jobs market continues to weaken it could justify a larger cut of 50 basis points.
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The bitcoin price has surged over the last year, hitting an all-time high of $123,000 per bitcoin last month.
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CME’s Fed Watch tool is now showing the market is pricing in an around 90% chance of an interest rate cut in September, creating a situation that mirrors the 2024 September rate cut that took market off-guard and spurred the bitcoin price to a record-breaking rally.
“Last year’s August growth scare spurred the Fed into a ‘catch-up rate cut rush’ from September to December 2024, doubling bitcoin’s price in the process,” Presto Research’s Peter Chung and Min Jung wrote in a note this week. “The current setup feels eerily similar.”