Bitcoin recently made the headlines as it surged to one-month highs on Monday and maintained its rally after a massive cut in interest rates by the Federal Reserve last week. Meanwhile, other financial markets saw the Japanese yen remain weak as markets were relatively quiet due to a public holiday in Japan. Speculation on the causes of the Bitcoin rally and other cryptocurrencies has just begun to surge among analysts and investors.
As of 12:27 PM IST on Monday, Bitcoin gained up to 1.3% at $63,703. The second-largest cryptocurrency by market cap, Ethereum, also observed a significant uptick, jumping 3% to $2,656. Many other cryptocurrencies also booked returns in the positive. For example, Binance Coin surged 1.9%, while Solana had gained just 0.3%. Toncoin had gained by 1% and Cardano had taken the lead at 1.3%. Avalanche had advanced by 2.2%, while NEAR Protocol was up as much as 9%.
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Market Insights & Analyst Forecasts
Market analysts are now keeping a close eye on Bitcoin as the currency is approaching major technical levels. As pointed out by Avinash Shekhar, Co-Founder & CEO of Pi42, Bitcoin is now at a decisive stage and there is a high possibility of it going into a significant rise if it closes above the $70,000. He reminded investors that if Bitcoin cannot go above this resistance level, then it will most probably fall back toward the $60,000 line. At the time of his analysis, Bitcoin had broken through to just above $64,200, so it was going to be very crucial in terms of the near-term direction in the next few days.
Meanwhile, Ethereum looks like it is bouncing off a very critical support level versus Bitcoin, which fuels speculation that Ethereum could just be getting ready to turn around. Analysts are looking for more evidence as to what the market will end up showing. XRP broke a very important level recently and Solana somehow held a hefty drop off of key support one week ago.
The total global crypto market capitalization has gained 0.97% over the past 24 hours and now stands at $2.23 trillion. This wider market rally is sowing seeds of positivity among investors, especially as some of the recent central bank decisions started influencing the risk assets, such as the particular kind of cryptocurrencies.
Role of Fed and Other Central Banks
Another critical fuel behind the fresh rally of Bitcoin is the decision of the Federal Reserve cutting interest rates by 50 basis points last week. This has significantly shifted market sentiment as there are fewer fears of a U.S. recession looming in the immediate horizon and risk-on assets such as equities and cryptocurrencies being shoved onto the positive side. Lower interest rates make borrowing cheaper and impulse investors to seek higher returns in more volatile markets, and of course, cryptocurrencies.
The stand taken by the Fed does not necessarily affect just the U.S. markets. Other financial markets in Asia and Europe respond to this move with their stance on this change in monetary policy. For instance, the BOJ has shunned the idea of raising its interest rates for the past week, which indicated that there is no plan in the near future to hike rates, thus making it a stable one. This also coincided with the Federal Reserve’s rate cut and served to arrest the appreciation of the yen. Japanese yen had rallied 1.4% till the beginning of September. The dovish statement by the BOJ would serve to undo some of these gains that would weaken the yen even further against the other major currencies.
Trading volumes in Asian markets are seen to be thin as Japan celebrates the Autumnal Equinox, but questions of further cuts by the Federal Reserve remain front and center. In that regard, expectations for further cuts by the Fed make risk assets like cryptos, commodities, and equities even more appealing. Investors now expect the Fed to keep cutting this coming months-and which, therefore, makes Bitcoin-friendly.
Global Macro Outlook
According to recent report by Goldman Sachs, the rate cut from the Fed has somewhat relieved the anxieties in the U.S. about an impending recession. Analysts at the firm believe that while inflation remains something of a risk, the Fed’s proactiveness may have an upside by steadying the economy and not sharply falling in. The G10 FX team at Goldman Sachs stated that the US dollar is quite likely to bounce a bit modestly in three months of time, but is more likely to soften again on a six- and twelve-month horizon.
The actions by Fed futures traders are bolstering expectations for further Federal Reserve rate cuts, as they now anticipate 75 basis points of rate cuts by the end of this year. Traders already are pricing in nearly 200 basis points of cuts by December 2025, according to data from CME FedWatch, which would take the federal funds policy rate of the Fed down to 2.75% by the end of next year. The support for higher-risk assets that this would create continues, to include Bitcoin as investors increasingly seek alternatives to traditional low-yielding assets like bonds in these environments.
Bitcoin Correlation with Broader Financial Markets
One interesting trend of recent months is its positive correlation with financial markets, with most trending a beeline to equities, commodities, and bonds. Traditionally, the movement of Bitcoin is seen to loosely be in sync with the traditional financial assets as these are somehow influenced by the actions of the central banks. For example, in the wake of recent rate cut by the Fed, the yield curve of U.S. Treasury have steepened as investors gauge long-term interest rate increases with the anticipation of stronger growth going forward. In the meantime, investors are piling even more bets on another significant rate cut to be executed by the Fed.
These dynamics cut directly to the heart of Bitcoin and other cryptocurrencies. As inflationary worries continue to haunt, and central banks everywhere ease monetary policies, investor interest in cryptocurrencies as a less-than-horrible hedge against currency devaluation and inflation rises. In the current market, Bitcoin, as a kind of store of value, has been further substantiated particularly among institutional investors now starting to view it as “digital gold.”
Future Outlook of Bitcoin and Other Cryptocurrencies
While the price did rally recently, the immediate future of Bitcoin looks pretty uncertain. While a small number of analysts are optimistic that it may see its next rally if it breaks above $70,000, most others look at things rather pessimistically. Actually, if this cryptocurrency fails to break above that resistance level, it can expect a pullback to the $60,000 mark or even lower. The same degree of uncertainty can be applied to Ethereum, which trades at the moment near a critical support against Bitcoin. If it breaks it, Ethereum might experience more downside pressure in the coming days.
Still, the overall long-term prospects of the cryptocurrency market look fairly optimistic, and even more so as the central banks of most countries continue to pursue accommodative monetary policy measures. Of course, expectations for additional rate cuts by the Federal Reserve will keep cryptocurrencies in the forefront for the foreseeable future. It’s apparent that many investors are coming to digital assets as a hedge against inflation, currency devaluation, and the normal economic malaise of uncertain times.
Apart from Bitcoin and Ethereum, several other cryptocurrencies have been performing well in the last few days. NEAR Protocol surged by as much as 9%, while Avalanche and Binance Coin also made decent gains. These smaller altcoins are benefitting from overall bullish sentiments witnessed in the crypto market as investors seek higher returns in more speculative assets.
The crypto market cap is at $2.23 trillion, and it’s obvious that cryptocurrencies have become more mainstream in their asset class. Instead, the risks associated with the market should not be underestimated. In the short term, the current rally can continue uninterrupted. Investors must, however, be cautioned and prepared as such for higher than expected volatility that may occur due to reaction to news items on central bank policies and the global economy.
Conclusion
The recent explosion of Bitcoin and other cryptocurrencies could be partly because of such variation in factors like the Federal Reserve’s interest rate-cut decision, dovish note by Bank of Japan, and increased expectations over further cuts in the interest rates going ahead. So long as the respective central banks do not let their monetary policies become less accommodative, risk assets like Bitcoin, Ethereum, and other varieties of cryptocurrencies are bound to continue gaining through this positive macroeconomic environment.
Though, it should be mentioned that the cryptocurrency market still stays pretty unpredictable, and further development of Bitcoin, as well as other digital currencies more broadly, will depend on many variables – local technical resistance levels, global economic circumstances, as well as further central bank actions. Now, investors are interested in the occasion when Bitcoin breaks through $70,000, hoping that with this move a new rally will start.