Investing.com – surpassed $40,000 on the dollar for the first time in 2023 on Monday, supported by growing optimism about an early interest rate cut by the Federal Reserve, while remains focused on the ability to approve spot exchange-traded funds for tokens.
The world’s largest cryptocurrency rose 2.7% to $40,521.0, extending gains after a three-week rally. The token hit $40,825.0 earlier in the day — its highest level since May 2022, before the stablecoin debacle sparked a more than year-long slump in crypto markets .
The world’s No. 2 cryptocurrency rose 1.9% to $2,210.49 – its highest level since May 2022.
The main point of support for bitcoin and cryptocurrency prices is dollar weakness, as growing expectations of an early Fed rate cut have sparked a rally in risk assets.
Markets found recent comments from Fed Chairman Jerome Powell to be decidedly less hawkish, as he flagged a growing need for a balance between tightening monetary conditions and still boosting the economy. The US economy landed gently.
This suggests traders are starting to price in a Fed rate hold in December and a more than 60% chance of a rate cut as soon as March 2024. Fed meeting date set is December 12 and 13.
But US inflation remains well above the Fed’s 2% annual target, while the labor market also appears strong. Data released this Friday is expected to provide more signals.
The prospect of lower interest rates bodes well for bitcoin, as loose monetary policy and increased speculative trading activity have driven the token to a record high of nearly $69,000 in 2021.
Since then, it has plummeted as interest rates have risen, while the cryptocurrency industry has also been devastated by a series of high-profile bankruptcies and regulatory crackdowns. Recently, Binance – the world’s largest cryptocurrency exchange – pleaded guilty to charges by the Department of Justice of money laundering and now faces a fine of more than $4 billion.
ETF speculation also supports bitcoin
Still, bitcoin has more than doubled in value this year, with most of the gains coming in recent weeks as investors speculate about the possible approval of a U.S. ETF that directly tracks the price of bitcoin. electronic money.
Cryptocurrency advocates argue that approval of such a product would attract large amounts of institutional capital to bitcoin. But as products such as the Grayscale Bitcoin Trust () (OTC:) – which tracks bitcoin futures prices – have seen a decline in investor interest over the past year, doubts remain. how much institutional capital will be attracted to the ETF.
The Securities and Exchange Commission has given no indication that it intends to approve a spot ETF in the near term, even though Grayscale won a key legal battle against the regulator for approval spot ETF application.