Bitcoin is bound to soar
2024-09-24

From last week's Fed rate cut and increased demand for bitcoin ETFs to bipartisan political support, the list goes on. Although for different reasons, the traders around me and I seem to agree that they will drive the rally.

One of the main drivers behind Bitcoin's rise was the Federal Reserve's recent decision to cut interest rates by 50 basis points, a decision that weakened the dollar and made Bitcoin an attractive hedge against inflation and fiscal uncertainty. With the U.S. fiscal debt reaching $35 trillion and increasing by $1 trillion every 100 days, Bitcoin is increasingly seen as a gold-like store of value.
Any signal that monetary policy is easing and the dollar could weaken is good for Bitcoin. So far this year, bitcoin has surged 45 percent, outpacing gold's 27 percent gain.

Political developments also boosted sentiment. At a fundraiser in New York over the weekend, US Vice President Kamala Harris expressed support for digital assets and publicly mentioned the crypto industry for the first time.

Previously, former US President Donald Trump's pro-cryptocurrency stance advocated more friendly regulation. While the crypto community remains wary of Harris' stance, Bernstein analysts believe her admission, along with Trump's endorsement, suggests that bipartisan support could lead to greater regulatory clarity.

The momentum of Bitcoin ETFs will also continue to be an important factor. Despite the recent price volatility, inflows into the Bitcoin ETF remained net positive, with total inflows of $17 billion.

The stability of bitcoin miners after the halving also contributed to the positive sentiment.
The Bitcoin halving event reduces block rewards for miners and often leads to a period of instability in the mining industry. However, one full quarter after the halving in April 2024, the network's hash rate has returned to pre-halving levels, suggesting that the market has absorbed the impact.

In addition, the major sell-off in Bitcoin appears to have ended, providing a clear path for further price gains. Both the German government and the Mt. Gox trustee, which owns a large amount of bitcoins, have completed the sale, and the market has absorbed more than $11 billion worth of bitcoins without any major price disruption.

At the same time, major institutional investor MicroStrategy raised another $2.1 billion to buy more bitcoins, increasing its holdings to 252,220 bitcoins, or about 1.3 percent of the total bitcoin supply.