Bitcoin (BTC) fell 7% between September 5 and September 7, but held its daily close near $54,000, later recovering some of its losses to reach $55,300. This move mirrored price action in global equity markets, but several factors, including expected inflation data and increased risk to the dominance of the US dollar, could help explain the Bitcoin price rally.
Mixed Expectations for Bitcoin Price Based on US Inflation Figures
The S&P 500 index futures have risen 1.4% since hitting a low on September 6, giving investors more confidence that the U.S. central bank will cut rates in the coming months to stimulate the economy. Economists are forecasting that inflation, which has historically been a barrier to less restrictive monetary policy, will slow. The U.S. CPI is expected to rise 2.6% year-over-year in August, with the report due on September 11.
The impact of falling inflation on Bitcoin is not simple or entirely clear, given that part of the appeal of cryptocurrencies is their ability to hedge against fixed monetary policy. However, some analysts believe that as businesses and individuals gain access to cheaper capital and fixed income investment yields decline, liquidity in the system increases, driving up Bitcoin’s price.
source: apsk32
User apsk32 took to the X social network to show that the previous US rate-cutting cycle that began in 2019 initially boosted Bitcoin’s bullish momentum, but proved unsustainable in the medium term. Nevertheless, the analyst argues that a potential correction to the $45,000 to $55,000 range could provide a great entry point for “survivors.”
Therefore, it is wise to be skeptical of bullish predictions for Bitcoin prices due to falling interest rates. Some argue that Bitcoin’s biggest threat comes from competition from technology stocks, whether because of the long-term correlation between the two assets or simply because these companies offer reliable cash flow and growth opportunities even in a relative scarcity environment.
Bitcoin Price Could Soar Due to US Election
Regardless of the monetary policy pursued by the U.S. Federal Reserve, investors’ attention is turning to the U.S. presidential election in November. Republican and former President Donald Trump has proposed imposing a 100% import tariff on countries that bypass the U.S. dollar in international transactions.
Recently, countries such as China, India, Brazil and Russia have considered using cross-collateralization to move away from the US dollar. In response, candidate Trump has pledged to maintain the US dollar’s status as the world’s preferred reserve currency, a promise he reaffirmed at a rally in Wisconsin on September 7, Bloomberg reported.
According to Yahoo Finance, Commerzbank AG strategist Ulrich Leuchtmann said Trump’s plan could inadvertently encourage countries to “move away from the dollar,” potentially undermining the safe-haven status of U.S. Treasuries. Leuchtmann advised investors to take Trump’s campaign promises critically, acknowledging that not all of them may come to fruition.
From a Bitcoin investment perspective, a weaker US dollar is generally a good sign for the price, but there is no guarantee that Bitcoin will outperform traditional stores of value such as gold, stocks or real estate. However, the recovery of Bitcoin’s key derivatives demand indicators should be viewed as a positive sign.
relevant: Bitcoin ETF sees $1.2 billion in outflows in 8 days
Despite recent price corrections, Bitcoin derivatives remain robust.
Bitcoin monthly futures trading is inherently costly due to the long settlement period, and sellers typically demand a premium of 5-10% per annum to compensate for this risk.
Bitcoin 2-month futures annual premium. Source: Laevitas
The annualized Bitcoin futures premium (the reference rate) has stabilized at 6%, indicating that demand for leveraged bets on price declines has remained consistent throughout the past week. While this level is lower than the more bullish 8% level from four weeks ago, the data shows a strong market and supports the strength of the $54,000 support level despite recent price volatility.
This article is for general information purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.