The US economy has entered what some analysts are referring to as a “Goldilocks” phase that could drive Bitcoin’s price to rally at the end of the year.
According to David Brickell, head of international distribution at FRNT Financial, and former forex trader Chris Mills, these just right conditions will create a fertile environment for risk assets like cryptocurrencies.
China’s recent $284 billion stimulus package has also added another catalyst to the mix.
“We can’t emphasise strongly enough the bullish macro backdrop,” Brickell and Mills wrote in their “Connecting the Dots” newsletter.
They are the latest to suggest that Bitcoin will rally before New Year’s Eve. Bitcoin rallied above $65,000 over the weekend.
The US
Several factors in the US look likely to drive Bitcoin’s rally at the end of 2024, according to Brickell and Mills.
The Federal Reserve cut interest rates by 0.5% in September. New inflation data suggests that another cut will come.
CME Group’s FedWatch tool says there’s an 86% chance that the US central bank will make a 0.25% cut in November.
For crypto, another rate reduction is good news. Lower rates incentivise investors to hunt for returns in risk-on assets like tech and cryptocurrencies.
“This is the Goldilocks scenario that we continue to see providing fertile ground for risk and we expect post-election, will drive a Santa rally ‘melt up’ as an under positioned market is forced to chase performance,” Brickell and Mills wrote.
Speaking of the election, the analysts said the rally may have some “additional vigour” if Donald Trump reclaims the White House.
The statement echoes the idea of the “Trump Trade,” a bet that Bitcoin will surge if the former president wins. The Republican candidate has been seen as more positive towards crypto than Vice President Kamala Harris.
Bernstein has said that Bitcoin will reach a record high of $90,000 in the short term if Trump wins and fall as low as $40,000 if he loses.
But Bernstein has since added a caveat: In the long run, “Bitcoin will do well in either outcome,” the Wall Street research firm’s analysts wrote earlier in October.
Larry Fink, BlackRock’s CEO, shared that sentiment in the investment giant’s latest earnings call on Friday.
“I’m not sure either president — or other candidate — would make a difference,” Fink said.
The China stimulus
China’s recent economic measures will also drive Bitcoin’s market momentum, Brickell and Mills wrote.
These measures will likely flood global markets with liquidity, benefiting the financial economy far more than China’s real economy, Brickell and Mills argued.
At the top of the list is a $284 billion bond issuance — the largest stimulus since the Covid-19 pandemic.
The People’s Bank of China has also cut the reserve requirements for banks, freeing up cash for them to lend to boost spending and investments.
BitMEX co-founder Arthur Hayes has also hinted that Beijing will trigger another rally.
“The real bazooka will come when Xi instructs banks to issue more credit,” Hayes wrote in a recent newsletter.
China’s stimulus package., the US economy and central banks around the globe cutting interest rates will unleash a wave of liquidity that will lift all boats, Brickell and Mills said. “The Bitcoin boat will be lifted highest.”
Crypto movers
Bitcoin is up 3.1% over the past 24 hours to about $64,670.
Ethereum is up 3.4% to $2,550.
What we’re reading
Mt. Gox payouts delayed until next year — no Bitcoin avalanche just yet — DL News
Bitcoin supply shock incoming — Milk Road
What’s with all the panic around CPI? — Milk Road
Ethereum Validators Could Lose Millions From Uniswap Fees After L2 Launch: The DeFi Report — Unchained
Google weekly relative search volume for ‘bitcoin’ hits lowest level in a year — The Block
Michael Saylor has big plans for MicroStrategy’s $16bn Bitcoin pile: ‘The end game is to be the leading Bitcoin bank’ — DL News
