Bitcoin and other major cryptocurrencies experienced gains on Thursday following the release of the US Federal Open Market Committee (FOMC) minutes from its July meeting. The minutes hinted at a potential interest rate cut in September, which could impact risk assets such as stocks and cryptocurrencies. Lower interest rates can make these assets more attractive by reducing borrowing costs and encouraging investment.
The overall cryptocurrency market capitalization increased by almost 2% after the FOMC minutes were released. Bitcoin, which had been trading in the $59,000 to $60,000 range, saw a jump of over 3%, pushing the digital asset above the $61,000 mark. Ethereum and Cardano also saw gains, with Ethereum increasing by over 2% to $2,630 and Cardano rising by 3%.
The rally in cryptocurrency prices triggered a rise in liquidations, with over $21 million in bitcoin short liquidations across centralized exchanges on Wednesday. The broader cryptocurrency market saw over $126 million in total liquidations, split evenly between long and short positions. Liquidations occur when a trader’s position is automatically closed due to insufficient funds to sustain it, typically resulting from a price surge in a specific direction.
The FOMC minutes reflected a more dovish stance from the Federal Reserve, indicating that the central bank may begin cutting interest rates in September. Some traders have criticized the Fed for holding rates for too long, especially after lower-than-expected revised employment figures were released by the US Bureau of Labor Statistics. This has raised concerns about whether the Fed has been slow to respond to changing economic conditions.
Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium is expected to provide further insights into the potential size of the rate cut in September. According to the CME FedWatch tool, there is a 67.5% probability of a 25 basis point cut and a 32.5% chance of a 50 basis point cut at the next meeting.
Expectations of a rate cut in September coincided with positive inflows into US spot bitcoin exchange-traded funds (ETFs). Grayscale’s mini bitcoin trust, Fidelity, Bitwise, BlackRock’s IBIT, Franklin Templeton’s EZBC, and Invesco’s BTCO all saw inflows, totaling $39 million on Wednesday. The total daily trading volume for the 12 Bitcoin ETFs reached $1.42 billion, with a total of $17.56 billion in net inflows since their launch.
In conclusion, the cryptocurrency market reacted positively to the FOMC minutes and the potential for a rate cut in September. The upcoming speech by Fed Chair Jerome Powell will be closely watched for further guidance on monetary policy. The influx of funds into Bitcoin ETFs indicates growing investor interest in the cryptocurrency market. As the market continues to evolve, it will be interesting to see how these developments impact the future of cryptocurrencies.
