Bitcoin Rebounds Amidst Fed Announcement
Federal Reserve Signals Rate Cuts in 2024
Bitcoin experienced a sharp rebound from recent losses today, mirroring a broader rally in risk-driven markets following the Federal Reserve's decision to maintain interest rates and indicate forthcoming rate cuts in 2024.
Bitcoin Surges 7.9%
The world's largest cryptocurrency surged 7.9% to reach $66,540.9 by 01:09 ET (05:09 GMT) after dipping as low as $60,000 the day before. The significant drop occurred due to a heavy bout of profit-taking before the Fed announcement, following Bitcoin's recent record highs.
Dollar Weakness Supports Bitcoin Recovery
Bitcoin's recovery was buoyed by weakness in the dollar, which sharply declined from two-week highs post-Fed announcement. This trend also lifted the broader cryptocurrency market, with Ethereum, the world's second-largest token, rising by 10% to $3,454.79 on Thursday.
Bitcoin's Favorable Environment in Low-Rate Conditions
The Federal Reserve maintained its forecast of a 75 basis point reduction in interest rates in 2024. Chair Jerome Powell also noted slow progress towards the Fed's 2% annual inflation target. Lower interest rates tend to benefit Bitcoin, thriving in high-liquidity environments that encourage speculative investments. The cryptocurrency's significant rally in 2021 was largely attributed to ultra-low interest rates following the COVID-19 pandemic.
Bitcoin's Strong Performance in 2024
Bitcoin has already surged by more than 50% in 2024, following an impressive over 100% rally throughout 2023. The latest gains were propelled by increased capital inflows after the approval of spot exchange-traded funds for U.S. markets earlier in the year. These spot ETFs simplify Bitcoin investment for traditional investors, potentially setting the stage for a further rally later in 2024.
Analysts' Outlook
Analysts anticipate Bitcoin surpassing the $100,000 mark by the end of 2024. However, the cryptocurrency industry still faces challenges, including a loss of faith due to high-profile frauds and scandals over the past two years. Bitcoin's perceived volatility also deters risk-averse investors from entering the market.
