The U.S. Federal Reserve (Fed) will officially hold the FOMC interest rate meeting on September 17, 2024, Taiwan time. The current market consensus is that the Fed will most likely start the long-awaited interest rate cut this month, but it will only fall by 1%. Still 2 yards.
But unlike the rebound in U.S. stocks, Bitcoin’s recent performance has continued to be weak, causing investors to worry. Will Bitcoin really rise with the arrival of interest rate cuts?
Insights provided by Arthur Hayes
Regarding the weakness of Bitcoin, BitMEX founder Arthur Hayes posted an article on X last night pointing out that it may be related to reverse repurchase agreements (RRPs).
Since the interest rate currently offered by RRPs is 5.3%, which is higher than the yield on short-term Treasury bonds of 4.38%, Hayes believes that large money market funds will withdraw funds from Treasury bonds and invest in reverse repurchase agreements, which will lead to investment in the market. Funding for risky assets such as Bitcoin dwindled.
Hayes gave an example. Since the Federal Reserve announced that it might cut interest rates in September, an additional $120 billion has flowed into reverse repurchase agreements.
A summary of the good and bad factors in September
According to data from the past 11 years, the probability of Bitcoin falling in September is as high as 72%. Will it happen again this time? Here’s a quick summary of the potential pros/cons:
Negative factors:
1. According to Arkham Intelligence data , although Mt. Gox has repaid most of its Bitcoins, its wallet still holds more than 40,000 BTCs. Continued repayments may still pose risks to the price.
2. The U.S. government transferred nearly $600 million in Bitcoin related to Silk Road in mid-August. It is unclear whether it is for escrow or preparation for sale.
3. Analysts pointed out that the actual entry price of short-term BTC holders is currently around $63,250. Since mid-June, BTC has been difficult to break through this level. Analysts warned that before BTC can re-convert this area into a support level , the market may face continued selling pressure.
Pros:
1. Expectations for the Federal Reserve to cut interest rates in September are currently very high. If there are no surprises in this week's August non-farm payrolls data, it will further deepen the Fed's confidence in cutting interest rates.
2. Taking stock of the performance of the S&P 500 Index before the past nine U.S. presidential elections, the probability of U.S. stocks rising in the three months before the election is 78% , which may also help the trend of Bitcoin.
3. CryptoQuant data points out that the selling pressure from Bitcoin miners is weakening and may form an upward momentum if absorbed.
