Bitcoin Holds $60,000. Here’s Why It Matters

Bitcoin (BTC) gained 4% between August 21 and August 22, and despite losing some momentum, it held support at $60,000. Some analysts argue that a break above the $62,000 resistance level is needed to confirm the bullish trend. However, given the market’s confidence that the U.S. Federal Reserve (Fed) will implement expansionary measures, the odds are still high for Bitcoin bulls.

Bitcoin fundamentals and spot ETF flows remain robust.

Bitcoin analyst and investor Decode believes that BTC price needs to break above the 200-day moving average, especially at the monthly close, to “restart the uptrend.”

However, Decode added that Bitcoin “seems to have lost momentum now (…) so while August and September are likely to be a drag, I am prepared to be bullish and surprised by Q4.”

Essentially, investors expect the bulls to remain bullish in the medium term, but do not anticipate any immediate catalyst to narrow the gap between Bitcoin and traditional markets.

Investors expect the Federal Open Market Committee (FOMC) to cut rates at its next meeting, which is scheduled to conclude on September 18. Some economists see a 0.50% rate cut as a possibility, which would be considered aggressive and generally favorable for risk-taking markets.

Such a cut would lower the rewards for fixed-income investments such as U.S. Treasuries and reduce the cost of capital for corporations. Even a 0.25% rate cut would signal to markets that the most severe phase of monetary tightening is over.

Some traders may note that the S&P 500 is trading 1% below its all-time high, while even gold, often considered the world’s most reliable store of value, hit an all-time high on August 20. Bitcoin, on the other hand, remains 16% below its all-time high of $71,943 in June 2024. This discrepancy is partly due to differences in risk perception: stocks provide a cushion through dividends and a strong balance sheet, while gold is seen as a hedge.

Meanwhile, Bitcoin continues to struggle to establish itself as a non-correlated asset that serves multiple purposes. For example, global gold ETFs have $246.2 billion in assets under management, according to gold.org, while spot Bitcoin products, including ETFs and ETNs, total $66.6 billion, according to CoinShares. Despite Bitcoin’s inherent censorship resistance and fixed monetary policy, it still has a long way to go before it can solidify its place in traditional financial markets.

This difference in risk perception explains why gold’s rally to $2,531 has not been reflected in Bitcoin’s performance. While investors are certainly concerned about the U.S. government’s fiscal debt and are seeking protection in scarce assets, most are not yet ready to fully embrace a standalone digital currency. However, recent inflows into spot Bitcoin ETFs suggest a promising path forward. These products recorded net inflows of $226 million in the four trading days ending August 21, suggesting that interest will grow once initial hurdles are overcome.

relevant: Cryptocurrency Companies to Contribute 48% of All Corporate Political Donations by 2024: Report

Bitcoin could benefit from a constructive regulatory approach.

In addition to macroeconomic trends, the cryptocurrency industry is also looking more positive as the US presidential election approaches in November. Candidates have a strong incentive to publicly support the digital finance industry, regardless of their actual intentions. According to a Bloomberg report on August 21, Democratic presidential candidate Kamala Harris has pledged to support the continued growth of the cryptocurrency industry.

Ultimately, as long as US employment and inflation data remain neutral to positive, the Fed’s less stringent monetary policy is more likely. This could help reduce government spending on debt repayments, but it could also weaken the domestic currency as investors look elsewhere for better fixed income opportunities. As a result, the odds of Bitcoin breaking $62,000 before year-end remain solid.