A halt in the rate-hike cycle is supported by Fed officials, which heightens expectations that the tightening cycle has stopped.
Early in 2019, against a similar Fed background, bitcoin quadrupled to $13,880.
Although history is said to not always repeat itself, it does rhyme in the financial markets.
The dovish remarks made recently by leaders of the U.S. Federal Reserve (Fed) have brought back memories of early 2019, when bitcoin (BTC) spiked over 300% against a similar Fed background.
To control inflation, the Fed has increased interest rates by 525 basis points since the beginning of 2022. The “cycle of tightening liquidity” has been one of the main causes of suffering for riskier assets, such as bitcoin.
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The Fed’s officials have provided a dovish reprieve this week. Neel Kashkari of the Minneapolis Fed and Raphael Bostic of the Atlanta Fed both stated on Tuesday that more rate increases might not be necessary by the central bank.
According to Reuters, Fed Governor Christopher Waller and President Lorie Logan of the Dallas Fed said that the Fed’s mission has been accomplished by raising Treasury rates, negating the urgent need for another rate rise.
Bitcoin’s 300% Gain Since 2019: Fed Supports Rate Pause,Bitcoin’s 300% Gain Since 2019: Fed Supports Rate Pause
These remarks have reinforced the market’s perception that the central bank would now wait to watch how the macroeconomic environment develops in the upcoming months, with the bank’s feared tightening cycle coming to an end with July’s 25 basis point rate.
Rates peaked at 2.5% in December 2018 during the Fed’s previous three-year rate cycle, after which the central bank went into a seven-month wait-and-watch mode. By late June 2019, Bitcoin has risen to $13,880 from its December 2018 low.
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Another noteworthy similarity is that, like it did four years ago, the most recent break in the Fed’s tightening cycle occurs several months ahead of the mining reward halving on the purportedly bullish Bitcoin blockchain.
“Looking back on 2019, the Fed ended its cycle of rate hikes and instituted a seven-month hiatus. In the course of this time, Bitcoin saw a spectacular price surge, rising by an astounding 325%,” head of research and strategy Markus Thielen said in a letter to clients last week. “In line with our outlook, it’s highly likely that the Fed concluded its rate-hiking cycle in July 2023.”
“At present, the most critical macroeconomic factor appears to be a reflection of the situation in 2019 when the Fed paused its rake hikes, leading to a significant surge in bitcoin prices,” said Thielen.
Put another way, historical evidence points to an upside in bitcoin, providing everything else is equal. According to CoinDesk statistics, the top cryptocurrency by market value changed hands at $26,800 at the time of publication, indicating a 62% rise year to date.
Bitcoin’s 300% Gain Since 2019: Fed Supports Rate Pause,Bitcoin’s 300% Gain Since 2019: Fed Supports Rate Pause,Bitcoin’s 300% Gain Since 2019: Fed Supports Rate Pause