(Kitco News) – Tuesday’s dovish comments from Fed Chair Jerome Powell boosted sentiment for investors, who took the possibility of a rate cut in September as a signal to reengage with the markets, sparking a rise in asset prices from cryptos to stocks and gold.
Data provided by TradingView shows that Bitcoin (BTC) rallied to a high of $59,500 in early trading on Wednesday; however, bears aren’t relinquishing their recent gains without a fight, as evidenced by the top crypto’s subsequent pullback below $58,000.
BTC/USD Chart by TradingView
Wednesday morning saw another appearance by Powell before Congress, this time before the House Financial Services Committee, where he delivered part two of his semiannual policy update. The Fed Chair largely stuck to a similar script as Tuesday, saying that the Fed still needs more "good data" to be confident that inflation is moving towards its 2% target.
Powell added that to cut interest rates, the central bank needs “greater confidence that inflation is moving sustainably towards 2%,” noting that the most recent inflation readings have been encouraging in this regard.
During the question and answer period, Powell told the committee that the central bank considers the proposed federal stablecoin framework to be important, and they are “fully behind it.”
Market watchers are widely anticipating at least two interest rate cuts in 2024, and the recent dovish comments from Powell have reinforced this expectation. The CME FedWatch tool shows that Wall Street currently puts the odds of a rate cut in September at 75%, up from 73% yesterday.
Investors are also anxiously awaiting Thursday’s crucial consumer inflation report hoping that a cooler reading will help lock in a rate cut in September. But they don’t want the print to come in too low as that could potentially stoke concerns about a recession, which would threaten the labor market.
Bitcoin’s recovery in recent days comes despite the negative pressure brought on by large BTC sales by the German government, which has been offloading hundreds of millions of dollars worth of Bitcoin on a daily basis over the past few weeks.
In June, they moved 50,000 BTC seized from now-defunct illegal streaming site Movie2k.to onto exchanges. On June 19, German authorities began selling their stash in large tranches, with data provided by Arkham showing that they now hold 13.11k BTC.
The selling has largely coincided with declines in Bitcoin’s price, but most analysts agree that things will take a more positive turn once they exhaust their supply.
"There are indeed market fears about the German Government's reported intention to sell off its inventory of Bitcoins,” said Lennix Lai, OKX Chief Commercial Officer, in a note to Kitco Crypto. “However, taking reference from previous cases, while such sell-offs may result in short-term volatility, the Bitcoin market tends to have adequate liquidity to absorb them and rebound fairly quickly. It's unlikely that these sell-offs will trigger a landslide drop in Bitcoin price."
Macrotrader and economist Alex Krüger supported this line of thinking. “Entering the final stretch of the German onslaught,” he tweeted on Monday. “They will eventually run out of coin.”
Krüger’s tweet came as the German government increased their selling activities and transferred more than 16,000 Bitcoins to exchanges and brokers.
“16,038 BTC ($910 million at the time) moved price by -3.5% ($2,000). The market could absorb the rest in one scoop,” he noted, before also addressing the threat posed by Mt. Gox distributing BTC to creditors. “Just as the market can absorb Mt. Gox flows. These will eventually run out.”
According to market intelligence platform Sentiment, the recent pullback and bounce higher has triggered a bullish indicator.
“After Bitcoin's retrace to as low as $55.4K, a very bullish signal is within reach,” Santiment tweeted. “Average returns of traders active in the past year are only +1.8%, the lowest level since BTC bounced above $20K for good back on March 11, 2023.”
“One of the top signals for all of crypto that @santimentfeed values is when both Bitcoin's 30-day and 365-day MVRV are in negative territory,” they added. “This is when there is mathematical validation that you are buying relative to other traders' pain. If you had bought the last time both of these lines were in negative territory, your return on BTC would be at +132%.”
And SkyBridge Capital founder Anthony Scaramucci continues to maintain that Bitcoin will surge to a new all-time high (ATH) in less than six months.
“We still love the fundamentals of Bitcoin long-term. And I do think, as I said, it’ll be $170,000 post-halving, but I think you can get to $100,000 by year-end, but it has to chug through this slog right now,” he said during a CNBC interview.
Scaramucci pointed to FTX account holders as a bullish factor many have overlooked as they are in the process of having their funds returned to them following the exchange’s collapse. He anticipates that a large number of them will reinvest in Bitcoin.
“FTX is going to be releasing shortly $16 billion roughly of cash to investors that had their accounts at FTX,” he said. “And so that’s very good news for Bitcoin holders, I believe because a lot of that was in Bitcoin. It got frozen in the bankruptcy. It got dollarized, unfortunately at low numbers for Bitcoin, but it’s going to go back to those account holders shortly, and we think a lot of that may flow into the asset.”
Scaramucci also highlighted why crypto has turned into a popular topic concerning the upcoming elections in the U.S.
“Let’s say there’s only 20 million wallets of eligible voters in the United States, and let’s say 10% of them are single-issue voters,” he noted. “You got 2 million potential voters in a very close, very narrow election being resolved by six or seven swing states that could be single-issue digital asset voters. I think it’s overwhelming conclusion that this will be an acceptable long-term asset class in the United States.”
At the time of writing, Bitcoin trades at $57,900, an increase of 0.63% on the 24-hour chart.
