(Kitco News) – Stocks climbed higher on Wednesday while the ‘store of value’ assets – Bitcoin (BTC) and gold – trended lower as the minutes from the Fed’s September meeting showed that central bank representatives were mixed on the size of the recent interest rate cut.
The minutes showed that a “substantial majority” of officials supported the larger interest rate cut, but a handful called for a 25 bps cut, seeing the 50 bps cut that was ultimately approved as excessive.
“Some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision,” the minutes read.
As a result of the revelation of disagreement, market watchers decreased their expectations for a rate cut in November. The CME FedWatch Tool now puts the odds of no rate cut at 19%, up from 15% yesterday and 0% last week.
“On the volatility front, the MOVE index, which tracks anticipated volatility in U.S. Treasuries, hit a peak on Monday—the highest since early January,” said analysts at Secure Digital Markets. “This surge could signal a tightening in financial conditions and increased risk aversion, possibly impacting riskier assets, including stocks and Bitcoin.”
While Bitcoin has faced bearish pressure on Wednesday, the same cannot be said for stocks, which opened higher and held their gains into the close. At the closing bell, the S&P, Dow, and Nasdaq were all in the green, up 0.71%, 1.03%, and 0.60%, respectively.
Data provided by TradingView shows that after trading near support at $62,000 for much of the day, bears managed to overcome bulls in the afternoon, leading to a Bitcoin price dump to lower support.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $61,042, a decrease of 1.96% on the 24-hour chart. Spot gold is currently down 0.52% on the session and trades at $2,607.50 per ounce.
Three factors that will push Bitcoin above $80,000
After getting off to a hot start in 2024 with a 75% rally to a new record high near $74,000, Bitcoin has been trapped in a consolidation range and has slowly drifted lower. According to Matt Hougan, CIO of Bitwise, Bitcoin “needs three things” to rally to a new high, with “one additional factor [that] could shift things into high gear.”
“[P]rice predictions are conditional,” Hougan said. “They depend on what happens in the world. With that in mind, here’s what I think needs to happen for my $80,000 price prediction to come true by year’s end. The good news: It’s not much.”
The first factor highlighted by Hougan is the upcoming election in the U.S.
“Anything but a Democratic Sweep,” he said. “The U.S. election is a big deal for crypto. Most people assume it’s a binary outcome: Trump = Good, Harris = Bad.”
“Undoubtedly, Republican wins portend well for crypto, given the GOP’s strong and growing advocacy for the space,” he added. “I think it’s more nuanced on the Democratic side.”
Hougan highlighted the Democratic Party’s “disparate views on crypto, from Senator Elizabeth Warren’s (D-Mass.) ‘Anti-Crypto Army’ to Representative Ritchie Torres’ (D-N.Y.) deep support.”
“The problem of the past four years is that the Warren wing has controlled policy and agency appointments, and that has created a hostile environment for the sector,” he said. “To thrive, Bitcoin doesn’t need politicians. It just needs them to get out of the way. And barring a Democratic sweep of both houses of Congress and the White House, I suspect they will, with the Democrats taking a more neutral approach to the industry.”
He suggested that this is already underway, citing comments from Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, who recently said “crypto is inevitable.”
“I suspect that kind of attitude will be enough to get us to $80,000,” Hougans said, noting that “ Polymarket currently puts the odds of a Democratic sweep at 20%.”
The second factor is the Economy, he said. “The number one reason people are attracted to Bitcoin is simple: You can’t trust the government with money. That idea helped birth Bitcoin in 2008 and remains a powerful driver of crypto today. It’s become so well accepted that even BlackRock is using it in its marketing pitches for Bitcoin.”
“It’s why crypto rallied when the Fed cut rates by 50 basis points despite a growing U.S. economy, and why it surged when China unleashed 2 trillion yuan in economic stimulus in late September,” Hougan added. “The market is hungry for more. It currently expects an additional 50 bps in easing from the Federal Reserve by year’s end, and additional fiscal stimulus from China as well. If it gets both, I suspect we will get our Q4 rally. If we don’t, I think the disappointment could weigh on the market.”
The third factor identified by Hougan is the hope that there are “no major negative surprises” for crypto.
“The final thing we need to get our $80,000 rally is a period with no major surprises. No major hacks. No massive new lawsuits. No previously locked coins suddenly coming to market,” he said. “Crypto’s history is unfortunately beset by countless such surprises. Over the past few quarters, the release of previously locked-up bitcoin from the failed exchange Mt. Gox and from government coffers has contributed to keeping us range-bound.”
“If we can make it through the end of the year without similar shocks, I’d expect new all-time highs and beyond,” Hougan said.
As for other factors that could help, he said that while “Some Bitcoiners will hate me for saying this, I think a broader rally in crypto would help seal the deal.”
“To be clear: Bitcoin doesn't need Ethereum, Solana, or novel altcoins for its long-term success,” he stressed. “In fact, it is often hurt by the shenanigans in the altcoin space. But if we're going to get a full-on melt-up in the short-term—say, a rip to $100,000 in just a few months—it would help to have a bit of pro-crypto sentiment sweep the market.”
Hougan noted that “The last long choppy period in Bitcoin I remember stretched from June 2019 to June 2020, when Bitcoin traded in a tight range from $8,000-$10,000 (with the exception of a short dip during the COVID panic). It began turning upward in the late summer of 2020 and proceeded to march straight towards $60,000. Most of that was driven by COVID-era stimulus, but some of it was (for lack of a better word) vibes. Specifically, the ‘DeFi Summer’ of 2020 gave investors a reason to be excited about crypto again, and some of those animal spirits spilled over into bitcoin.”
“This year, those animal spirits have been in short supply outside of Bitcoin,” he observed. “But I can almost see them rising in areas like stablecoins, where AUM is tracking to new all-time highs; new high-throughput blockchains, where communities are rallying around projects like Sui, Aptos, and Monad; and innovative projects like Babylon, which is working on ways for Bitcoin investors to generate yield from staking.”
“Strong and sustained momentum in these areas would bolster the melt-up case,” he argued.
That said, he highlighted that “It's worth remembering that Bitcoin has already had a pretty good year.”
“It is one of the best-performing assets in the world, up 49%, and it has had incredibly strong news flow,” he noted. “We've seen Bitcoin ETFs launch and become collectively the best-performing ETF launch of all time. We've seen significant institutional adoption, with 60% of the largest hedge funds now owning Bitcoin. And we've seen Bitcoin enter the mainstream political conversation in a way that would have been hard to imagine just a few years ago. Heck, two years ago, FTX was imploding, and Sam Bankman-Fried was in the headlines; today, Larry Fink is on TV talking about Bitcoin taking over the world.”
“All this suggests to me that we'll get to $80,000 (and much more) next year, almost regardless of news developments,” Hougan concluded. “But if we want to get there by year’s end, the playbook above could help.”
Altcoins in the red
The majority of tokens in the top 200 recorded losses on Wednesday as the prospect of the Fed holding interest rates steady at their next meeting diminished traders' desire for the riskier side of the crypto market.
Daily cryptocurrency market performance. Source: Coin360
Baby Doge Coin (BabyDoge) was the top gainer with a 26% surge, while Chiliz (CHZ) climbed 15.5% and SuperVerse increased by 5.2%. FTX Token (FTT) was the biggest loser, falling 9.6%, while cat in a dogs world (MEW) lost 8.8%, and Mog Coin (MOG) declined by 8.7%.
The overall cryptocurrency market cap now stands at $2.13 trillion, and Bitcoin’s dominance rate is 56.6%.
