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Author: Anthony Pompliano, compiled; Shaw bitchain vision
To investors.
Markets generally believe the Fed will cut interest rates in September, which will drive prices of Bitcoin and other assets up.After the rate cut, the price of Bitcoin soared, right?At least everyone on the Internet said so.
butHistory tells us a more complex story.
Binance Research has just released a new study that showsThe Fed’s rate cut is not a reliable independent indicator of Bitcoin’s price trend.
Remember, data doesn’t care about your feelings or opinions.Numbers themselves are numbers, that’s all.
Binance Research has conducted in-depth research on relevant data.They found that the United States has experienced three major interest rate cut cycles since Bitcoin entered the mainstream in 2014.The study only focuses on the rate cut cycles in 2019 and 2024, as the rate cut in 2020 was triggered by a one-time global pandemic.
So what happened when the Fed cut interest rates in 2019?
Bitcoin presents a typical “rumor buying, news selling” model.In the months leading to the rate cut, the price of Bitcoin soared from about $4,000 to $13,000.However, once the rate cut is truly implemented, the price begins to fall.
The prospects for interest rate cuts in 2024 are not so clear.The sharp rise in Bitcoin prices after the rate cut is closely related to changes in the U.S. election situation, so it is difficult to attribute price volatility entirely to the rate cut itself.
Therefore, in 2019 we saw Bitcoin price fall after a rate cut, and by 2024, the drivers of Bitcoin price increase appear more complicated.
Binance Research then conducted two quantitative analyses, both of which showed a lack of stable and significant correlation between interest rates and Bitcoin prices.
The first study compared the year-on-year changes in the U.S. federal funds rate with the year-on-year changes in Bitcoin price.The analysis showed that there was no obvious negative correlation between the two.
The second analysis uses interest rate futures market data to measure market expectations for future interest rate changes and analyzes its correlation with Bitcoin price for six months.The results again show that the relationship between the two is extremely unstable, indicating that market expectations of interest rate changes can hardly explain any linear fluctuations in Bitcoin prices.
So,If interest rates are not the driver of Bitcoin price, then what is it?
Binance Research points out that liquidity is the key.They pointed out:Chicago Federal Reserve Bank National Financial Conditions Index (NFCI)Historical data of this key indicator shows thatThere is a relatively obvious negative correlation between the degree of tightness of the index and the fluctuations in Bitcoin price.The index has shown an upward trend recently, and it is worth the market’s vigilance.”
So while everyone is expecting the Fed rate cut in September, don’t expect this to be the reason for the price of Bitcoin to rise.
I am a Bitcoin supporter.I think Bitcoin will continue to rise.But after seeing these data from Binance Research, I will pay more attention to it all.
