Written by Samer Hasn, Senior Market Analyst at XS.com
Bitcoin is trading cautiously today as it continues to hold just above the $95,000 level. It is still down about 12% from the all-time high of $108,388 seen last week.
Bitcoin’s moves come amid very low sentiment amid concerns about the pace of U.S. interest rate cuts next year. The quiet moves also coincide with the holiday season, which causes relatively low liquidity in the markets.
The notable drop in appetite for risky assets comes after Jerome Powell’s strict tone last week. Despite the rate cut in the decision that preceded the speech, concerns about the higher-for-longer rates are dominating sentiment. As for January, markets are only expecting a 25-basis point rate cut with a 10% chance, according to the CME FedWatch Tool.
In fact, I believe that markets can overcome the negative sentiment that comes from prolonged high interest rates, and they have done so this year. Bitcoin reached new highs earlier this year before the Fed cut rates in September. However, adjusting to tighter monetary conditions and higher rates requires continued favorable economic data.
Last week’s data was mixed, with services activity growth accelerating, real estate numbers better than expected in general, and at least not bad inflation data, and unexpectedly contracting manufacturing activity and weaker-than-expected growth in core retail sales, personal income, and spending.
While continued better-than-expected data should boost risk appetite and stock and cryptocurrency gains, even with a slower-than-expected rate cut, I believe so, so it may be a matter of time before Bitcoin’s bull run resumes.
In addition, markets are waiting to see what policies Donald Trump might actually implement to boost Bitcoin and crypto adoption. This comes in addition to optimism about further growth upon Trump’s return, which may enhance the economy’s resilience in the face of high rates.
Zaid Barem / YMM
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