Fed Chair Jerome Powell’s recent comments on the risks faced by the US economy have had a significant impact on the price of Bitcoin (BTC), pushing it to new yearly highs at $39,000. Powell highlighted the balance between the risk of not raising interest rates enough to combat inflation and the risk of over-tightening and weakening the economy unnecessarily.
Previously, Powell had been warning of further interest rate hikes, but his shift in tone follows his colleague Christopher Waller’s suggestion for rate cuts in 2024. This change in sentiment from Powell caused US stock prices to rise and bond yields to decrease, as investors started betting on rate cuts in the first quarter of 2024.
As the market implied likelihood of the Fed cutting interest rates increased, Bitcoin, which is often seen as a risk-sensitive asset, experienced a surge in its price. Additionally, the easing financial conditions characterized by falling bond yields and increased liquidity have also contributed to Bitcoin’s growth.
Not only does Bitcoin benefit from macroeconomic factors, but it also continues to gain support from crypto-specific bullish narratives. Institutional adoption and the anticipated approval of spot Bitcoin ETFs in the US are expected to drive new buying pressure in the market. The increase in assets under management of Proshares’ Bitcoin Strategy ETF, a futures-based ETF, indicates that institutions are already seeking exposure to Bitcoin.
Furthermore, Bitcoin’s structural sell pressure from network validators, or miners, is expected to decrease in 2024. The issuance rate of Bitcoin is set to be halved next April, leading to a potential drop in sell pressure. These combined bullish factors make Bitcoin an attractive investment option, as it has consistently proven to be during recent weeks.
Short-term Bullish Speculation and Resistance Levels
Following its significant pump of 28.5% in October, Bitcoin maintained an upward trend throughout November, supported by its 21DMA. With its price surpassing the resistance at $38,000, short-term bullish speculators are now aiming for a move above $40,000 and potentially reaching the resistance level near the April 2022 highs above $43,000. Some even predict a test of the 2022 highs at $48,000 before the end of the year.
