Author: Zoltan Vardai, CoinTelegraph; Translated by: Deng Tong, Golden Finance
The latest interest rate decision of the Bank of England may bring more upward momentum to the price of Bitcoin.
On August 1, the Bank of England announced a 0.25% interest rate cut to the current 5%, ending one of the longest interest rate hike cycles in history.
The Bank of England cuts interest rates. Source: Bank of England
Bitcoin prices could benefit from an unexpected rate cut as economists are divided on whether the central bank will cut rates or keep them on hold.
Easy monetary policy has historically boosted risk assets such as Bitcoin and gold, but despite the rate cuts, Bitcoin prices have remained range-bound.
Bitcoin price remains below $65,000 amid U.S. monetary policy
Despite the UK’s first interest rate cut in four years, the price of Bitcoin remains below the $65,000 mark.
As of 11:20 a.m. UTC on Aug. 1, Bitcoin was down 2.4% in 24 hours, trading at $64,507, according to CoinMarketCap, while trading essentially flat over the past week.
BTC/USD, one-month chart. Source: CoinMarketCap
The subdued price action can likely be attributed to the Federal Reserve’s decision to keep its key lending rate unchanged in August.
However, Bitfinex analysts noted that with the U.S. interest rate cut in September, the Bitcoin price could see significant new liquidity and upward momentum:
“A rate cut in September will generate optimism and could generally increase market liquidity, which is positive for Bitcoin and other cryptocurrencies as investors seek higher returns outside of traditional assets. This could lead to upward pressure on Bitcoin prices and increased ETF inflows as investors look to take advantage of a more favorable environment for risk assets.”
Slowing Bitcoin ETF Inflows Put Pressure on BTC Price
Slowing inflows into U.S. spot Bitcoin exchange-traded funds (ETFs) could also be behind Bitcoin’s lackluster price action.
According to Farside Investors, U.S. ETFs accumulated just $300,000 worth of Bitcoin on July 31, while on July 30 they had accumulated net outflows of more than $18.3 million.
Bitcoin ETF flows (in millions of dollars). Source: Farside Investors
ETF inflows can significantly contribute to cryptocurrency price appreciation. In the case of Bitcoin, ETFs accounted for around 75% of new investments in the world’s largest cryptocurrency as of February 15, with the price of Bitcoin topping the $50,000 mark.
