(Kitco News) – It was a red start to the day for asset prices as cryptos, stocks, and gold all experienced declines amid the waning ‘Trump Trade’ momentum and a renewed focus on the Federal Reserve and interest rate cuts.
Concerns that the Fed may be forced to pause future rate cuts rose after Federal Reserve governor Adriana Kugler said the central bank had made progress on its job and inflation goals but suggested that a rate cut pause could be necessary if inflation starts to tick higher again.
“The United States has seen considerable disinflation while experiencing a cooling but still resilient labor market,” Kugler said in a speech at the 2024 Annual Meeting of the Latin American and Caribbean Economic Association and the Latin American and Caribbean Chapter of the Econometric Society, in Montevideo, Uruguay. “Numbers just released this week show headline and core PCE inflation have fallen substantially from 7.1 percent to an estimated 2.3 percent and from 5.6 percent to an estimated 2.8 percent, respectively.”
Kugler said that “While wage moderation and anchored inflation expectations may allow us to continue making progress on inflation, stubborn housing inflation and high inflation in certain goods and services categories may stall progress in reaching our target.”
“At the same time, labor markets have rebalanced, given greater labor supply from immigration and prime-age workers and lower demand from restrictive monetary policy,” she added. “Thus, although the labor market experienced an extended period of low unemployment and job creation these past several years and strong real wage growth, the labor market has cooled.”
“This combination of a continued but slowing trend in disinflation and cooling labor markets means that we need to continue paying attention to both sides of our mandate,” Kugler said. “If any risks arise that stall progress or reaccelerate inflation, it would be appropriate to pause our policy rate cuts. But if the labor market slows down suddenly, it would be appropriate to continue to gradually reduce the policy rate.”
Concerns about an interest rate pause were amplified after the September Producer Price Index (PPI) came in hotter than expected, with the annual PPI rising 2.4%, higher than the 2.3% expected by economists, while the last month’s annual PPI was revised higher from 1.8% to 1.9%.
Following the comments from Kugler and the PPI print, market watchers are now focused on upcoming comments from Fed Chair Jerome Powell on how he sees inflation developing and his outlook for rate cuts. In the background, the market is also preparing for any potential upward pressure on prices due to President-elect Donald Trump's policies.
Data provided by TradingView shows that Bitcoin (BTC) is now consolidating above $88,000 following its breakout to a new all-time high of $93,540 on Wednesday.
BTC/USD Chart by TradingView
Most analysts agree that this is just a temporary pause in the ramping-up bull market cycle, and soon, King Crypto will resume its ascent as bulls push to reach the highly prized price of $100,000.
“BTC recently surpassed $93,000, with the primary driver being the continuous net inflow of $4 billion from traditional funds represented by BTC ETFs over the past five trading days, averaging a daily net inflow of $800 million and a daily purchase of 10,000 BTC,” said Ryan Lee, Chief Analyst at Bitget Research.
“The main reasons behind traditional funds' large-scale BTC purchases are notable,” he added. “One reason is the U.S. reserve asset narrative. President-elect Trump hinted to attendees at this year's Nashville Bitcoin Conference that he may consider managing Bitcoin as a national reserve asset if he takes office, a move that would elevate BTC to the status of gold. Should Bitcoin become a U.S. reserve asset, it could lead to similar moves by other countries, triggering net inflows amounting to hundreds of billions of dollars and pushing BTC to new heights.”
“Another reason is the expected improvement in liquidity,” Lee said. “Trump has consolidated control over Congress, and with Elon Musk’s support, he could influence the Federal Reserve’s monetary policy. This suggests that Trump may be able to impact both monetary and fiscal policies.”
“Based on Trump’s pre-election plans, it is highly likely he would adopt aggressive fiscal policies alongside loose monetary policies, signaling a strong probability of improved macro liquidity next year,” he speculated. “As Bitcoin holds attributes of both a risk asset and an inflation hedge, it would likely benefit first.”
An additional factor highlighted by Lee “is the anticipated enhancement of crypto policies. The U.S. may introduce cryptocurrency-related legislation next year, offering a mid- to long-term boost to the crypto market.”
“The projected price range within one month is approximately $82,000 to $110,000,” he said. “Key indicators to monitor include the funding rate: if the funding rate for long positions in contracts exceeds an annualized 50%, or 0.05% per 8 hours, it could signal a potential adjustment.”
“Another indicator is the liquidation map in the derivatives market,” Lee added. “If BTC successfully breaks through 94,000, over $1 billion in short positions could be liquidated, potentially accelerating upward market movement. Additionally, tracking the inflows and outflows of BTC ETFs will be crucial.”
“Over the next six months, the predicted price range is approximately $73,000 to $150,000,” he concluded.
In the near term, analysts at Bet Ideas say that the chances of Bitcoin hitting $100,000 by the end of the year stand at 60%.
“Given Bitcoin’s recent surge following Donald Trump’s election, Bet Ideas gives the cryptocurrency an odds-on chance to surpass the $100,000 mark before the end of the year,” the analysts said in a note shared with Kitco Crypto. “Currently valued at $90,790 at the time of writing, Bitcoin is 4/6 – a 60% chance - to reach $100k before 2025.”
“As we near the end of 2024, Bitcoin has gone on an unprecedented bull run, especially in the wake of Donald Trump’s recent election win,” said Lee Astley, a spokesperson for Bet Ideas. “The odds of Bitcoin surpassing the $100,000 mark this year now stand at 4/6, implying there is a 60% chance of us seeing a six-figure value in the next six weeks. While optimism is high, factors like economic shifts and regulatory changes could impact Bitcoin’s path and limit its growth between now and the end of the year, but the odds still suggest it’s more likely to rise above $100,000 than not.”
At the time of writing, Bitcoin trades at $88,370, a decrease of 5.12% on the 24-hour chart.
