Why Bitcoin's Year-End Rally to $100,000 Wasn't 'Outrageous' Despite Price Decline

Bitcoin price is down. However, analysts say it is too early to count on a crypto rally. Here's what drives the price.

Contents

The Fed Everything is politics Treasury Traditional players Politics is heating up Crypto market movers What are we studying?

Analysts say a number of macroeconomic factors will drive Bitcoin's price to $100,000 and beyond.

Their comments came as the world's largest cryptocurrency fell below the $60,000 mark over the weekend, dampening traders' confidence in the crypto rally.

However, there are reasons to be bullish, says crypto analyst Noel Acheson.

The price of Bitcoin rose nearly 270% from late August to late December 2020, after halving earlier, she said in her “Crypto is a macro” Sunday Newsletter.

By comparison, Bitcoin now only needs to climb some 70% to reach $100,000.

It's “not an extreme forecast,” she added, acknowledging that things are different than in 2020.

Others share the sentiment. “

“The macro is developing perfectly for Bitcoin to continue the higher trend, although we continue to wait for the spark,” wrote David Brickell, head of international distribution at FRNT Financial and former forex trader Chris Mill.Connecting the dots” newsletter.

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So what drives the price of Bitcoin?

The Fed

Jerome Powell passed away on August 23.

After months of hemming and hawing, the Federal Reserve chair has given her strongest indication that the central bank is going to cut interest rates.

“It's time to adjust policy,” Powell said at the Kansas City Fed's Jackson Hole Economic Symposium in Wyoming.

This is great news for assets like cryptocurrencies, which behave as risk-on assets and are particularly susceptible to favorable economic environments.

Or, as Matt Haugan, chief investment officer at Bitwise, put it recently Newsletter: Rate cuts “will inject some animal spirits into the market.”

FedWatch The data puts the odds of the Fed cutting rates by 0.25% in September at 69% and a 31% chance it will cut rates by 0.5%.

Market watchers have been waiting for these cuts for months. Back in February, Fundstrat Global Advisors' Thomas Lee argued that the price of Bitcoin would rise to $150,000 by the end of 2024 and $500,000 over the next five years.

Everything is politics

Analysts say the upcoming presidential election will also have an impact on the price

In November, American voters will choose between Donald Trump and Kamala Harris. For crypto voters, it's a choice between a candidate who has made several pro-crypto statements and a candidate who hasn't made his views clear on the matter.

The election looked like a foregone conclusion before Biden bowed out. But now there's Trump and Harris Neck and neck At the polls, Acheson said this created more uncertainty and drove down the price.

Treasury

According to Bitmex co-founder Arthur Hayes, the election will also affect Treasury Secretary Janet Yellen's policies.

In a recent blog, Yellen wrote that she hopes to stack the cards in Harris' favor by pouring up to $1 trillion into the markets — boosting liquidity for traders.

“The next stop for Bitcoin is $100,000,” Hayes said.

Traditional players

The launch of spot bitcoin exchange-traded funds cemented Wall Street's interest in crypto this year. Goldman Sachs and Morgan Stanley have revealed that between them they have more than $600 million in spot bitcoin ETFs.

Crypto-native asset manager Hashdex said that exposure suggests institutional players will enter the industry, including, eventually, pension funds.

Politics is heating up

While Harris' crypto views are unclear, both Democrats and Republicans have warmed to crypto.

In May, members of both parties voted to repeal SAB 121, a controversial accounting guidance from the Securities and Exchange Commission that critics say prevented investment banks from offering crypto custody at scale.

Capitol Hill's thawing attitude toward crypto is a “very positive long-term setup for bitcoin,” Haugan said.

“We've had record ETF inflows, rapid institutional adoption, the effects of the bitcoin halving, a heating up political and regulatory environment, and runaway federal deficits,” he said. “It's hard to imagine better conditions.”