Some predictions about the price of Bitcoin are starting to circulate, according to which it might not have the strength to return close to the highs of March: the dollar and the Fed could play a crucial role in this phase.

The predictions of Bitfinex

Yesterday, the latest issue of Bitfinex Alpha, the weekly report from the Bitfinex exchange on the crypto market, was published.

The analysts of the exchange point out that the growth of recent days, which ended on Sunday, was due to expectations for the Bitcoin 2024 conference in Nashville, the one attended by Donald Trump.

In fact, the conference ended on Saturday 27th, precisely the day of Trump’s speech, and on Sunday the price rose up to $70,000 only to slightly correct between yesterday and today.

According to the analysts at Bitfinex, in the short term, there could be a price stall of Bitcoin, or a lateralization. However, the key support could hold, and thus this phase of stall could also be followed by a new bull momentum.

The current situation 

One of the key points of the current situation are the option expirations on Friday, August 2.

The recent return to calm in the market potentially foreshadows a period of consolidation or small profit-taking. To this, we must add the ongoing distribution of BTC to the creditors of Mt. Gox, which the market is absorbing well. 

The hypothesis is that stronger hands are coming into play, and that the current price is mainly realized by short-term holders, who bought at around $65,700, making this level a solid support. 

Even the futures markets have seen an increase in open interest, indicating that leverage is back in play. The increase in leveraged positions, and the recent reduction in implied volatility, suggest the hypothesis of a short-term stall.

After Friday, August 2, new scenarios can open up instead. 

The US economy: the impact of future Fed decisions on Bitcoin price forecasts

Regarding the evolution of the current situation, that is after August 2, a key point will be the monetary policy decisions of the Fed. 

Tomorrow the Fed should leave rates unchanged, but in September it should finally start to reduce them. 

In fact, inflationary pressures in the USA have eased, despite the US economy showing stronger-than-expected growth in the second quarter of 2024. 

This growth has been fueled by significant consumer spending and corporate investments, but with prices only moderately increasing thanks to lower costs of goods that have offset higher prices of services. 

For these reasons, the rate cut in September is considered very likely. 

The problem in the USA is still the real estate market, which at this moment acts as a brake on growth, with sales of existing homes falling more than expected due to record average prices. 

But the increase in supply, and the decrease in rates, of mortgages give hope for a potential recovery. In the end, the overall economic outlook remains cautiously optimistic, thanks to robust growth, moderate inflation, and potential improvements in the real estate market. 

Bitcoin Forecast: the role of the Fed on the price of BTC

In light of all this, the Fed might be almost forced in September to finally start cutting interest rates, which have been very high for almost two years now. 

Already last month it started to reduce the QT, that is the withdrawal from the markets of the enormous quantity of dollars injected in 2020/2021. 

Both the reduction of QT and the rate cut are measures that reduce the restrictiveness of the current monetary policy, which therefore should become less restrictive within a few months, although not yet expansive. 

The rest, in the coming months, could be done by a possible weakening of the dollar. 

The USA politics

All these medium/long-term forecasts are, however, subject to the presidential elections at the beginning of November. 

The candidate Donald Trump, currently favored, on Saturday in Nashville highlighted the potential of Bitcoin to revolutionize the US economy, emphasizing his desire to impose and defend American dominance over the cryptocurrency. 

He promised to appoint a new president of the SEC in support of cryptocurrency innovation, firing Gary Gensler, and proposed creating a strategic national reserve in Bitcoin, preventing government authorities from selling the BTC seized over the years. 

He also predicted that in the future the market capitalization of Bitcoin will surpass that of gold. 

It is not yet clear what the challenger, Kamala Harris, might do in this area if she were to be elected.