Bitcoin (BTC) soared to a historic high, trading as high as $106,000 in the early Asian trading session before retreating to around $104,500. The cryptocurrency surged to a record high with increasing market interest in the U.S. Federal Reserve’s monetary policies and the expected rate hike outcomes on the financial markets.
The Federal Reserve will announce its third consecutive interest rate cut, seeing its benchmark borrowing rate drop between 4.25% and 4.5%. This is the fourth consecutive rate cut decision made since September, contributing to 100 basis points. The market players look forward to gaining more information concerning the next steps through the Fed's "dot plot," which outlines the new directions of future interest rates.
The prior dot plot in September indicated expectations for 2.5% points of rate cuts by the end of 2026 and bring the borrowing costs below 3%. However, analysts believe the Fed will downgrade these projections for the current year, stating much improved economic performance and inflation dynamics. Federal Reserve Chair Jerome Powell will give more details on developments during a press briefing.
Fears that its commentary has turned ‘hawkish’ have stoked expectations that both Treasury yields and the US dollar will keep climbing – posing challenges for risk assets like Bitcoin. Nevertheless, it has support from some macroeconomic factors and positive seasons.
More evidence points to the upside in Bitcoin because global monetary policies adopted by central banks involve reducing interest rates to facilitate growth. Experts have noted that this factor and the anticipated PBoC loosening monetary policy in China will support Bitcoin price increases.
Seasonal effects also favor Bitcoin as a currency for international transactions. It has a positive history in December, making it favorable to fortify its stand. In the same turn, constructive sentiment from President-elect Donald Trump on detailed regulations on cryptos has assisted in enhancing market sentiments, thus balancing any unfavorable feeling sparked by a stringent Fed outlook.
During the week, more info about inflation is expected to be presented with the release of the core Personal Consumption Expenditures (PCE) index, the preferred measure of inflation by the Federal Reserve. There is interest in whether recent price movements reflect transient movements or inflation pressures.