Why is Bitcoin rising against the odds?
Important takeaways
- Bitcoin rallied today despite concerns in broader markets.
- Investors have opened their eyes to the so-called “Fed pivot”, or a softening in the US central bank’s stance on interest rates.
- Markets appear to have started pricing in negative developments in the US economy as bullish catalysts, with the idea that hard numbers will force the Fed to reconsider its rate hikes.
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Bitcoin has posted surprising gains today. Shares are also doing well for the second day in a row.
Ironic markets
Despite a worrisome macro landscape, Bitcoin, stocks and other stocks are enjoying gains in the week so far.
The moves are surprising considering recent hawkishness from the Federal Reserve, which has been resolute throughout the year in its commitment to raise interest rates. Risky assets like stocks and crypto typically suffer against such moves, but the Fed has shown little indication that it is willing to slow down.
Ironically, however, investors seem to be seeing signs of weakness in the US economy (e.g. today’s report from the Bureau of Labor Statistics, which shows a drop in the number of vacancies – from 11.2 million to 10.1 million) as positive signs for the markets. The rationale behind such bullishness is that explicit signs of recession could force the Fed to reconsider its policy.
That hope was fueled yesterday by a plea from a United Nations agency for the Federal Reserve to dramatically slow or even halt its rate hikes. In a report published yesterdayargued the United Nations Conference on Trade and Development that the Fed’s aggressive rate hikes risk provoking a recession, with poor countries worst off.
The so called “Fat pivot” would be a welcome development for crypto investors, at least in the short term. Market watchers have worried throughout the year that the Fed’s aggressive rate hikes could tip an economy bloated by quantitative easing into a full-scale recession. Nonetheless, all indications from the Fed are that it intends to stay the course, with Chairman Jerome Powell warning in August of “pain” in front of.
Bitcoin’s daily gains come in at a modest 3.64% at the time of writing; bounce is nevertheless refreshing in the brutal and prolonged bear market. In fact, while stocks are also up today, last week’s stock market rout left Bitcoin largely unaffected. This has given some weight to the oft-cited theory that Bitcoin could one day disconnect from stock development, but the markets must produce much more data before such a trend can be verified.
Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies. The material presented in this article is for informational purposes only and should not be considered investment advice.
