The Bitcoin (BTC) price has dipped back below $43,000 in wake of hawkish comments from Fed Chairman Jerome Powell, who on Wednesday commented that he doesn’t think it likely the FOMC will be confident enough to cut US interest rates as soon as March.
Powell: Not Likely Committee Will Be Confident Enough By March to Cut Rates
— *Walter Bloomberg (@DeItaone) January 31, 2024
His comments come after the Fed announced that it had decided to leave interest rates unchanged at 5.25-5.5%, as expected.
In its policy announcement, the Fed’s statement said that interest rate cuts won’t come until the Fed has greater confidence that inflation is moving sustainably lower.
The Bitcoin price was last just under $42,500, down 2.6% in 24 hours as per CoinMarketCap.
The downside in the Bitcoin price comes as traders pare back on bets for a Fed rate cut in March.
As per a CME tool, the money market implied probability of a 25 bps cut in March was 35.5%.
That’s down from over 40% on Tuesday and nearly 90% as recently as one month ago.
Bets that the Fed will have cut interest rates by 25 bps by May jumped to 62.9% from under 55% on Tuesday.
Meanwhile, money markets are pricing a roughly 32% chance that the Fed cuts interest rates by 50 bps by May.
That’s roughly unchanged versus one day and one week ago, but is down from over 70% one month ago.
In sum, markets suggest a rate cut is no longer likely in March, but remains a strong bet for May.
Macro to Remain a Tailwind
Despite the dip in the Bitcoin price as markets price out a March Fed cut, the macro backdrop is likely to remain a strong tailwind for BTC in 2024, as the Fed will start lowering interest rates and easing financial conditions sooner or later.
The Fed dropped any hints at possibly taking interest rates higher in its latest statement.
That confirms that the question is when and how fast the Fed starts lowering interest rates, not if.
Traders may continue to get caught offside betting on interest rate cuts to come too soon or not soon enough.
And this may continue to trigger volatility in the Bitcoin price, just like that seen on Wednesday.
But easing financial conditions is a widely known positive for cryptocurrencies, just like it is for other asset classes, like stocks, bonds and gold.
Macro tailwinds are one reason why investors will likely continue to buy major dips in the Bitcoin price.
Plenty of Bullish Narratives For 2024
But Bitcoin also has many other narratives to help keep its price underpinned.
Spot Bitcoin ETF approvals earlier this month have seen a flood of investment leave GBTC.
But that flood of selling has substantially eased, and new ETFs from BlackRock and Fidelity are attracting strong demand.
New Bitcoin ETFs look to have added a major new source of demand that is relatively insensitive to price.
Meanwhile, the upcoming Bitcoin halving in April will substantially reduce sell pressure from Bitcoin miners.
While there is no exact pattern or playbook that the Bitcoin price follows in the lead-up to and aftermath of a halving event, they have historically come ahead of fresh pumps to record highs.
If history does repeat itself, we could be looking at a Bitcoin price above $100,000 by 2025.
And this doesn’t even go on to mention potential US political and fiscal tailwinds that could support Bitcoin in 2024.
Where Next for the Bitcoin Price?
The Bitcoin price looks set to close out January almost exactly where it started the month.
After a more than 60% pump in the final four months of 2023, that’s not a bad start to the year.
The strong rebound from sub-$40,000 levels suggests the buy-the-dip mentality remains strong.
Bitcoin’s very short-term outlook is merky, with the cryptocurrency wedged between its 21 and 50DMAs at $42,000 and $42,850 respectively.
The price also remains stuck just below the 50% retracement back from monthly lows to monthly highs.
Bitcoin (BTC) Price Chart / Source: TradingView
Rangebound conditions may prevail in the coming months as traders look ahead to the halving.
Another wild card to watch is the end of the Fed’s March 2023 emergency liquidity program that staved off a bank crisis.
A re-emergent US bank crisis could be another tailwind for the Bitcoin price, just as it was in March 2023.
All said, a trip $10,000 higher to the low $50,000s seems more likely than a $10,000 dip lower to the low $30,000s in the months ahead.
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