Bitcoin
Three Sparks Propelling Bitcoin to $100,000 – DL News
- Bitcoin is getting ready to explode towards $100,000.
- While the Fed has not yet cut interest rates, it could be contributing to the recovery, analysts say.
Macro conditions have improved a lot for Bitcoin over the past week.
Both the Federal Reserve and the US Treasury made liquidity conditions significantly easier for risky assets in the second quarter of the year.
That’s according to David Brickell, head of international distribution at institutional capital markets firm FRNT Financial, and Chris Mill, a former FX trader at the Bank of England.
“Bitcoin may begin its next leg higher, beginning the climb to $100,000,” they he wrote in their joint crypto newsletter, “Connecting the Dots.”
Three reasons
The market has been very bearish lately, analysts said, and now it is likely to move higher again.
“The market is positioned very aggressively and underweight risk,” they wrote. “This aggressive positioning will need to unwind in the coming weeks and will provide a powerful tailwind to our markets.”
The analyst pointed out three reasons why liquidity conditions are likely to improve in the near future.
The first reason was that the Federal Reserve adopted a relatively dovish tone at last week’s Federal Open Market Committee meeting, quelling concerns that the US central bank might raise interest rates again soon.
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If it had raised interest rates, the Federal Reserve would have made it more expensive to lend money to people and businesses.
Risky investments like Bitcoin tend to perform poorly in these conditions, while the US dollar tends to grow stronger.
The agency also announced that it would scale back its quantitative tightening program sooner than expected – meaning it will reinvest an additional $35 billion into the bond market starting in June.
“[Fed chair] Jerome Powell is pushing the market to the right, with risk on the rise!” the report said.
The second reason was that the US Treasury announced a debt buyback program – the first of its kind since the early 2000s – that will aim to support liquidity in the Treasury market in June and July.
“Between the Fed and the US Treasury… liquidity conditions in the second quarter will be significantly easier to maintain control over yields and the dollar, reversing what was becoming a stronger headwind for both Bitcoin and risk broader,” the analysts wrote.
Finally, weak employment numbers were released on Friday – which the report says will force the Federal Reserve to cut rates soon.
“Especially before the election, the Fed will respond quickly to signs of weakness in the labor market,” he said.
“We were waiting for a spark that would lift us out of the lethargy and strong Bitcoin price action. Between the Fed and the US Treasury, this spark has been ignited,” the analysts added.
Crypto Market Movers
- Bitcoin fell 2.6% to $61,880 in the last 24 hours.
- Ethereum fell 2.3% to $3,000.
What are we reading
Tom Carreras is markets correspondent for DL News. Have a tip about Bitcoin? Get in touch at tcarreras@dlnews.com.