Will the sudden interest rate cut by the central bank push BTC higher? Will BTC create a new historical high in the future?

This Monday, the People’s Bank of China (PBOC) lowered the short-term policy and Benchmark loan Intrerest Rate. This move was unexpected and caught the entire market by surprise. More importantly, this move by the Central Bank has far-reaching implications, including in the Crypto Assets field. Some industry professionals and traders generally believe that China’s interest rate cut is a prelude, and BTC is expected to hit a historical high before September, within two months. After all, this is a major move by the world’s second-largest economy.

The price touched $68,000, did China’s unexpected rate cut become a catalyst for the rise of BTC?

The recent market trend of BTC has not been very good.

Especially last Sunday, after U.S. President Joe Biden announced he would not seek re-election, the price of BTC briefly fell. According to the relevant data, the drop in BTC resulted in the liquidation of futures contracts worth $159 million.

Of course, this wave of pain can at most be considered as labor pains. By Monday morning, the price of BTC had reached $68,000. Some opinions believe that this may be related to Biden’s withdrawal from the 2024 presidential election, and some investments have flowed back into BTC, which can be truly described as “what makes Xiaohe, also breaks Xiaohe”.

Speaking of the Central Bank’s interest rate cut this time, the 7-day reverse repo interest rate was reduced from 1.8% to 1.7%; the one-year Loan Prime Rate (LPR) was reduced from 3.45% to 3.35%; the five-year Loan Prime Rate (LPR) was reduced from 3.95% to 3.85%.

The rate cut came after the GDP rise of 4.7% in the second quarter was lower than expected, aiming to address weak consumer demand and the pressure of deflation, especially in the current real estate industry. After all, the real estate industry is still struggling, and many developers are facing huge financial difficulties.

Interest Rate drops globally have always attracted attention, especially the influence of Interest Rate drops in China, the world’s second largest economy, goes without saying. Therefore, the sudden announcement of an interest rate cut by the People’s Bank of China is seen by some industry insiders as a major boost for the continued rise of Bitcoin (BTC) in the future.

The United States did not follow the trend of interest rate cuts, and the future trend of BTC still needs to be observed.

However, compared to China, Cryptocurrency investors around the world are more eager for the Fed to respond with interest rate cuts.

We know that the interest rate is a key factor in the performance of risk assets, including cryptocurrencies. Since cryptocurrencies are mostly pegged to the US dollar, everyone pays more attention to the decisions of the Federal Reserve. According to the plan, the Federal Reserve is expected to hold its next Federal Open Market Committee meeting on July 31. There is no doubt that investors are eagerly awaiting the final decision of the Federal Reserve.

BTC tends to view the US interest rate drop as bullish, as it reduces the attractiveness of investments such as government bonds. This often leads to traders allocating a larger proportion of assets to higher-risk categories, such as stocks and Cryptocurrency.

According to the data from the Federal Reserve’s federal observation tool at the Chicago Mercantile exchange, almost all (about 95% of investors) in the market believe that the Fed will maintain the Intrerest Rate this time. Among them, nearly 90% believe that the Federal Open Market Committee will choose to cut interest rates after the meeting on September 18.

2024 seems to have become a crucial Node. Since entering 2024, many traders have long bet that the market has reached a very rare, large-scale coordinated global easing cycle, which will reverse half or more of the tightening policies. But now, as July is coming to an end, it means that more than half of the entire 2024 has passed, and substantial Favourable Information has not yet appeared.

Is BTC still on the rise, or will it weaken in the future?

Of course, despite the twists and turns of the road, we should believe that the future is still very bright.

In 2024, there will be many events that can affect the crypto world, such as BTC Halving, Mining Difficulty increase, but the real turbulence and change in the crypto world will come from the changes in the Federal Reserve interest rates.

We know that the Federal Reserve’s Intrerest Rate refers to the policy tool of adjusting the Intrerest Rate of the Federal Reserve System. These Intrerest Rates mainly include the federal funds Intrerest Rate, the discount rate, and the reserve Intrerest Rate. By adjusting these Intrerest Rates, the Federal Reserve can achieve the goal of implementing monetary policy.

Once the Federal Reserve cuts interest rates as predicted by many, in September or even by the end of July, it means that it has dropped borrowing costs, thereby stimulating investors to increase their investments in high-risk assets, and Bitcoin (BTC) is one of the important choices.

If the Fed cuts interest rates, the value of the dollar will decline, which could drive up the value of digital money such as BTC. As digital money like BTC tends to appreciate relative to the dollar, the more the dollar depreciates, the more momentum BTC will have to pump. In addition, interest rate cuts will raise inflation expectations, further boosting the value of digital money such as BTC. BTC, as a representative of digital money, is often considered as an effective means to hedge against inflation, so the rise in inflation expectations may boost BTC prices.

In addition to the Fed’s decision, another factor worth following is Ethereum. The US Ethereum Spot Exchange Trading Fund will start trading on the morning of July 23rd, Eastern Time. This is the first appearance of the Ethereum Spot Fund, and it is likely to enhance the positive moment of BTC and push it to a monthly high. BRN analyst Valentin Fournier said that if this trend continues, the price of BTC will continue to rise, or even break through the $70,000 mark.

Of course, in the current situation, BTC will not experience the parabolic acceleration and increase as before, but the positive ETF inflow will inevitably maintain the Rebound for a longer time than previously expected.

After discussing the rate cut by the Fed, let’s take a look at the rate cut by the central bank. What kind of impact will it have on the Cryptocurrency market, and what kind of impact will it have?

As early as June last year, the Central Bank of China chose to drop the Intrerest Rate to increase market Liquidity and promised to take measures to stimulate household consumption.

The price of BTC is very sensitive to the impact of currency liquidity, so China’s decision to turn to a more expansionary economic policy will have a positive effect on it. In addition to expansionary monetary policy, the new encryption regulations formulated by Hong Kong have also become a huge favorable information, which has had a profound impact on the cryptocurrency market in China, especially BTC.

In fact, more than just China has implemented interest rate cuts. The whole world is a huge closed loop when it comes to interest rate cuts.

In early June 2024, Canada’s Central Bank fired the first shot of interest rate cuts, becoming the first country in the G7 to start cutting interest rates; on June 6th, the European Central Bank announced measures to cut interest rates. It is worth noting that for the past 5 years, the European Central Bank has maintained a high level of interest rates and has always refrained from implementing a policy of interest rate cuts.

Therefore, the pressure has been put on the United States. Can the Federal Reserve cut interest rates? When will they cut? How much will they cut? We can only wait and see.