Bitcoin remains above the $100,000 level, a rally that analysts say is being fueled by increased risk appetite amid interest rate cuts by major central banks.
Bitfi,nex Derivatives President Jag Kooner stated that the easing expectations in interest rate policies, especially from the European Central Bank (ECB), the People's Bank of China and the US Federal Reserve (Fed), are positively reflected in the cryptocurrency markets.
Interest rate cut from ECB and China
Kooner said the ECB cut its deposit rate for the fourth time this year on Thursday, cutting it by 25 basis points to 3%. The move was taken in response to slowing inflation and weakening economic growth in the euro zone.
At the same time, expectations for further rate cuts are rising after the People’s Bank of China (PBoC) cut interest rates in October for the first time in 14 years. Wall Street giants such as Goldman Sachs and Morgan Stanley expect China to cut its policy rate by 40 basis points in 2025. This would be the biggest annual rate cut since 2015.
The Fed is also expected to make a decision to cut rates
All eyes are now on the Federal Reserve’s upcoming FOMC meeting on Dec. 18. CME’s FedWatch tool puts the probability of a 25 basis point rate cut at that meeting at over 96%. Lowering interest rates could result in investors shifting capital into riskier assets.
Kooner noted that the Fed’s potential rate cut, combined with easing steps in Europe and China, could improve global liquidity conditions. “Such policies could encourage capital flows into cryptocurrencies by increasing risk appetite,” he said.
“Santa Claus rally”
Kooner predicts that the combination of the expectation of a Fed rate cut and year-end market optimism could trigger a “Santa Claus rally” in crypto markets. He also noted that after the massive liquidations seen in the derivatives market last week ($1.7 billion in liquidations), the market is now ready for a new wave of upside.
“With the clearing of leveraged long positions, the ground has been prepared for a new upward movement in the coming weeks,” said Kooner, adding that Bitcoin could gain momentum during this period.
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