Bitcoin (BTC) has consolidated above the $58,000 support level throughout Friday morning, even as other asset classes, including equities and gold, experienced significant gains. Gold, in particular, has reached a new record high, surpassing $2,580 per ounce.
This surge across various assets has been largely attributed to the U.S. dollar’s decline, driven by speculation about a potential 50 basis point rate cut by the Federal Reserve.
“The U.S. dollar is falling against nearly all global currencies today, with heightened speculation about a 50 basis point rate cut for next week’s FOMC meeting,” explained Marc Chandler, Chief Market Strategist at Bannockburn Global Forex. “Recent reports, potentially sourced from Fed insiders, have boosted these expectations. Some former Fed officials also seem to support the idea of a half-point cut.”
Chandler noted that the probability of a 50 basis point rate cut has surged to just over 45%, up from less than 20% earlier in the week. This shift followed weaker Producer Price Index (PPI) data and speculation about potential Fed actions.
“The market is pricing in about 115 basis points of cuts this year, unchanged from last week. Upcoming data, including import/export prices and the University of Michigan’s September survey results, are unlikely to significantly alter this outlook,” Chandler added.
The decline in the U.S. Dollar Index (DXY) has benefited traditional assets like gold and stocks, but cryptocurrencies have shown minimal response, suggesting that digital asset traders are taking a cautious approach.
“Cryptocurrency market capitalization has remained relatively stable over the past 24 hours, decreasing slightly by 0.1% to $2.03 trillion,” noted Alex Kuptsikevich, Senior Market Analyst at FxPro. “The sentiment index, despite a slight increase to 32, remains in the ‘Fear’ zone.”
Kuptsikevich pointed out that Bitcoin has maintained a balance between buyers and sellers at $58,000, with more active buying shifting towards gold and equities. The daily chart shows a series of higher intraday highs, indicating a bullish trend.
TradingShot, an analyst on TradingView, anticipates a future rally for Bitcoin based on historical correlations with the DXY. “A year ago, we observed Bitcoin’s negative correlation with the DXY. BTC experienced a significant rally after DXY’s peak,” said TradingShot. “This correlation suggests that Bitcoin may rise if the DXY breaks below its 1W MA200, which hasn’t happened since January 2022.”
The analyst added that Bitcoin’s performance will likely be influenced by both stock market movements and the DXY. “If the stock market continues to rise, Bitcoin should follow suit, regardless of DXY’s behavior. However, if the DXY rebounds while stocks are up, Bitcoin might experience a moderate rally. Conversely, if the DXY falls below its 1W MA200 while stocks recover, Bitcoin could see a substantial increase.”
As traders await the Federal Reserve’s upcoming decision, Bitcoin’s trajectory remains closely tied to broader market dynamics and economic indicators.
