Why Is Bitcoin Price Stagnating? Investment Firm CEO Answers
10 Oktober 2024 - 3:00PM
NEWSBTC
The stagnation of the Bitcoin price despite the first rate cut by
the US Federal Reserve since 2020 has perplexed many investors and
traders within the market. In a new post on X, Andrew Kang, CEO of
Mechanism Capital addressed the disproportionate emphasis that
market participants have placed on Federal Reserve rate cuts and
economic stimulus in China. Why Is Bitcoin Stagnating? Kang
challenges the prevalent market belief that interest rate cuts by
the Federal Reserve will significantly boost Bitcoin and crypto
prices. “Fed rates are only one of the factors that impact global
liquidity, and global liquidity itself is only one of the factors
that influence crypto prices,” he stated. Kang finds it
“nonsensical to see BTC rally 4.5x during a period where rates were
going to and at multi-decade highs—showing little correlation
between rates and BTC—and then expect a strong inverse correlation
to present itself as soon as rates start going down.” Related
Reading: Bitcoin Whales Are Going Through A ‘Generational’ Shift,
CryptoQuant CEO He acknowledges that some argue future rate changes
are already priced into the market but counters that this logic
should apply equally to rate hikes and cuts. “This is not to say
that rates are not important, but rather that they are well
overweighted by most market participants,” Kang added. He notes
that equities have a stronger tie to interest rates due to factors
like discount rates used in valuing cash flows and mature corporate
debt markets used to finance growth. Addressing China’s recent
economic stimulus, Kang observes that its impact on Bitcoin and
crypto is even less significant than many believe. “It’s not
surprising to see that the people extrapolating China stimulus as
being extremely bullish for crypto are primarily non-Chinese,” he
commented. According to Kang, those within China have noted a shift
from crypto investments to A-shares in the stock market. Supporting
his claim with data, Kang pointed out, “Since Chinese stimulus was
announced, USDT has traded to a discount to CNY. Still at 3% as of
recent.” This suggests a decreased demand for the premier
stablecoin Tether (USDT) in China, aligning with a move towards
traditional equities. Despite his critiques, Kang clarifies that he
is not bearish on Bitcoin. “I just think that some people have
gotten over their skis a little,” he remarked. Kang anticipates
Bitcoin trading within a range of $50,000 to $72,000 until a
significant new catalyst emerges. Related Reading: Bitcoin ETF
Options Set To Supercharge Price Volatility, Expert Warns However,
he remains optimistic about opportunities within the market,
stating, “The constant rotation of capital and new projects being
developed means there will still be coins to buy to generate
returns as a bull.” Nonetheless, Kang warns of potential volatility
due to leveraged positions: “The market will still be prone to
smaller corrections if leverage gets too high (decently high right
now).” Engaging with the community, X user Jakubko (@erkousti)
suggested that Bitcoin’s 2023 price increase is more connected to
anticipation of an ETF launch than interest rates. Kang concurred,
responding, “That’s exactly my point. Interest rates are only a
small piece of the puzzle. Even though they were negative for BTC,
other factors like the ETF were able to drive BTC price higher.
Other factors could drive it higher or lower here. We are not
guaranteed infinity prices just because of rate cuts.” Echoing this
sentiment, crypto analyst Astronomer (@astronomer_zero) commented,
“I believe interest rates (and yield inversion) only have a
negligible impact on price. They are rather a holistic metric
important for bond market players. But the zero-effect on stocks or
crypto is proven already.” Another analyst, Res (@resdegen),
highlighted the correlation between Bitcoin and monetary supply:
“BTC is more correlated to the quantity of money than interest
rates. It started to rise as the RRP decreased, which ended up in
net positive liquidity, regardless of interest rates, which were
indeed close to the top.” At press time, BTC traded at $60,903.
Featured image created with DALL.E, chart from TradingView.com
Quant (COIN:QNTUSD)
Historical Stock Chart
Von Okt 2024 bis Nov 2024
Quant (COIN:QNTUSD)
Historical Stock Chart
Von Nov 2023 bis Nov 2024