Bitwise: Fed rate cut signal is clear, a new Bitcoin bull market begins
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Bitwise: Fed rate cut signal is clear, a new Bitcoin bull market begins
The fog of uncertainty surrounding Bitcoin this year has finally begun to lift.
Navigating Web3 tides with focused insightsAuthor: Matt Hougan, Chief Investment Officer at Bitwise
Translation: Luffy, Foresight News
People often ask me: Why has Bitcoin been trading sideways since March this year? My answer is: because markets hate uncertainty.
In the long run, Bitcoin’s outlook is extremely positive. We’re seeing record ETF inflows, accelerating institutional adoption, the aftermath of the Bitcoin halving, improving political and regulatory environments, and runaway federal deficits. All signs point to a breakout moment for Bitcoin.
Yet right now, Bitcoin’s price is going nowhere—and has been stuck like this for months. I believe the reason is that in the short term, markets are focused on uncertainty.
So what are these uncertainties?
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U.S. Election: Who will ultimately win? What will the Harris campaign’s stance be on crypto?
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Mt. Gox and U.S. Government Sales: After years in bankruptcy proceedings, Mt. Gox recently distributed billions of dollars worth of Bitcoin to its creditors. When will some of the largest holders cash out?
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SEC Enforcement Actions: As the SEC approaches the end of its fiscal year in September, what enforcement actions might it take?
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Fed Rate Cuts: When will the Federal Reserve begin cutting rates, and by how much?
Faced with these major short-term questions, investors hesitate and wait for clarity before entering the market.
This is why I reacted so strongly last week to Federal Reserve Chair Jerome Powell’s remarks at the press conference in Jackson Hole, Wyoming. One thing I appreciate about Jerome Powell is his clarity of communication—he’s the best-communicating Fed chair I’ve encountered in my entire career.
As Powell stated: “The time for policy adjustment has arrived. Rate cuts are coming; the timing and pace will depend on incoming data, evolving economic outlooks, and risks.”
The era of “higher-for-longer” interest rates is over. We are now entering a rate-cutting cycle spanning 2024–2025. The CME Group currently prices in a 100% probability of a rate cut at the September meeting, with around 200 basis points (2%) of total easing expected over the next year.
Historically, rate cuts have driven gains in risk assets like Bitcoin for several reasons. Academically speaking, lower rates reduce the discount factor used to calculate the present value of future asset cash flows, thereby increasing valuations. More importantly, rate cuts inject fresh liquidity into the financial system.
One of the oldest maxims in investing is “don’t fight the Fed.” This phrase typically warns investors against buying stocks and other risk assets when the Fed is hiking rates. The reverse is equally true: when rates are falling, investors should lean into risk assets.
I suspect Powell’s statement has fired the starting gun for Bitcoin’s next bull market. I don’t expect a straight-line rally—uncertainties remain. But I am confident a new era has begun, and as the election and other overhanging uncertainties clear, the path of the next bull market will become increasingly evident.
Powell’s message has lifted the veil of uncertainty around Bitcoin, at least partially, for the first time. That’s a beautiful beginning.
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