Bitcoin down despite macro optimism from BoE rate cut, Fed's dovish signals
Quick Take
- Bitcoin started August on a bearish note despite renewed macroeconomic optimism fueled by a rate cut from the Bank of England and signals from the Fed hinting at a similar move in September.
- The Bank of England has become the second G7 central bank to cut rates after the Bank of Canada’s decision in June.
Bitcoin's price has declined despite dovish macroeconomic signals, including the Bank of England's decision to cut rates by a quarter point and indications from the U.S. Federal Reserve that it may follow suit in September.
On Thursday, the BoE cut rates by a quarter point to 5% for the first time in the current cycle. The BoE is the second G7 central bank to lower rates this year, following the Bank of Canada's rate cut in June.
Also, after the Federal Reserve announced on Wednesday it would keep rates steady, Fed Chair Jerome Powell said that "a reduction in our policy rate could be on the table as soon as the next meeting in September." Equities responded positively, with the tech-heavy Nasdaq Composite index rebounding by 2.64% by the end of Wednesday's trading. The S&P 500 closed the session 1.58% higher, while the Dow Jones Industrial Average saw an increase of 0.24%.
According to Bitfinex Head of Derivatives Jag Kooner, cryptocurrency market investors should also see these signals as positive. "A rate cut in September, would provide a sense of bullishness and could generally increase liquidity in the market, which will be positive for bitcoin and other cryptocurrencies as investors seek higher returns outside traditional assets," he told The Block. "This could lead to upward pressure on bitcoin's price and increased ETF inflows as investors look to capitalize on a more favorable environment for risk assets."
Bitcoin faces significant overhangs
The digital asset is still facing significant overhangs. Bitcoin's price faces further potential sell-side pressure after Mt. Gox appears to have moved over $2 billion worth of BTC to a new address late Tuesday, according to data from Arkham Intelligence. This transfer is part of the ongoing effort to distribute recovered funds to creditors of the now-defunct exchange.
There has also been a slowdown in U.S. spot bitcoin exchange-traded funds inflows, which logged only $299,000 in net daily inflows on Wednesday. Only two spot Bitcoin ETFs posted net inflows, namely BlackRock IBIT’s $20.99 million and the Grayscale Bitcoin Mini Trust’s $18 million in net inflows, according to data from SosoValue. The Grayscale Bitcoin Mini Trust only began trading on Wednesday. Fidelity’s FBTC saw $31.57 million flow out of the fund, while Ark and 21Shares’ ARKB experienced net outflows of $4.61 million. Bitwise’s BITB logged $2.51 million in net outflows. The rest of the spot Bitcoin ETFs had zero flows.
Bitcoin traded around $64,763 at publication time, down 3% over the past day, according to The Block's Bitcoin Price Page.
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