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The stagnation of the Bitcoin price despite the first interest rate cut by the US Federal Reserve since 2020 has left many investors and traders within the market confused. In a new post on
Why is Bitcoin stagnant?
Kang Challenges The prevailing market belief is that interest rate cuts by the Federal Reserve will significantly boost the prices of Bitcoin and cryptocurrencies. “Federal interest rates are only one of the factors affecting global liquidity, and global liquidity itself is only one of the factors affecting cryptocurrency prices,” he said. Kang finds it “irrational to see BTC rise 4.5x during a period when interest rates were trending at multi-decade highs – showing little correlation between prices and BTC – and then expect a strong inverse correlation to emerge once prices start rising.” . under.”
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He acknowledges that some argue that future changes in interest rates have already been priced into the market, but he counters that this logic should apply equally to raising and lowering interest rates. “This does not mean that interest rates are not important, but rather that most market participants overestimate them,” Kang added. He points out that stocks have a stronger correlation with interest rates due to factors such as discount rates used in valuing cash flows and mature corporate debt markets used to finance growth.
Speaking about China’s recent economic stimulus, Kang noted that its impact on Bitcoin and cryptocurrencies is less significant than many think. “It is not surprising to see that the people who think Chinese stimulus is too optimistic for cryptocurrencies are primarily non-Chinese,” he commented. According to Kang, those in China have noticed a shift from cryptocurrency investments to Class A shares in the stock market.
Backing up his claim with data, Kang noted, “Since the announcement of China’s stimulus, USDT has been trading at a discount against the Chinese yuan. It remains at 3% as of recently. This indicates a decline in demand for the leading stablecoin Tether (USDT) in China,” In line with the move towards traditional stocks.
Despite his criticism, Kang makes it clear that he is not pessimistic about Bitcoin. “I think some people have outgrown their skis a little bit,” he said. Kang expects Bitcoin to trade in the range of $50,000 to $72,000 until a significant new catalyst emerges.
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However, he remains optimistic about the market opportunities, saying: “The constant rotation of capital and new projects being developed means that there will still be coins to buy for bull-like returns.” However, Kang warns of potential volatility due to leveraged positions: “The market will still be vulnerable to smaller corrections if leverage rises significantly (decently high at the moment).”
Interacting with the community, user Kang agreed, saying: “That’s exactly my point. Interest rates are just a small piece of the puzzle. Although they were negative for BTC, other factors like the ETF were able to push the price of BTC higher. Other factors that could push it Up or down here we are not guaranteed endless rates just because of interest rate cuts.
Echoing this sentiment, crypto analyst Astronomer (@astronomer_zero) commented: “I think interest rates (and yield reversal) have only a minimal impact on price. They are rather an important overall measure for players in the bond market. But zero impact on stocks or cryptocurrencies could Already proven.”
Another analyst, Res (@resdegen), Highlight Relationship between Bitcoin and money supply: “Bitcoin has more to do with the quantity of money than with interest rates. It started to rise as the benchmark interest rate fell, which ended up with positive net liquidity, regardless of interest rates, which were already near the top.
At press time, Bitcoin was trading at $60,903.
Featured image created with DALL.E, a chart from TradingView.com