Key takeaways
- Bitcoin hit $63,000 in a day after the Federal Reserve cut rates by 50 basis points.
- Lower rates could benefit cryptocurrencies and other assets perceived as risky.
- MicroStrategy shares jumped a day after it planned to raise $700 million in debt to buy more bitcoin.
- Looser monetary policy could benefit bitcoin in the short term, analysts say, although that could reverse if the Fed takes a negative stance on the economy.
The price of Bitcoin (BTCUSD) jumped over $63,000 on Thursday following a rate cut by the Federal Reserve.
The Fed’s fight against inflation has seen rates rise to their highest level in 23 years. Wednesday’s rate cut, the first of this cycle, boosted investor confidence in bitcoin, sending prices higher.
The Fed’s rate cut “could be a welcome development for bitcoin proponents,” said Lukman Otunuga, senior market analyst at FXTM, adding that a signal of easier financial conditions could boost appetite for riskier assets such as cryptocurrencies.
Bitcoin price rose immediately after the Fed announcement and continued its upward trajectory in recent trading.
Cryptocurrency-related stocks gain ground
MicroStrategy (MSTR), which holds more than 244,000 bitcoins worth more than $15 billion at current prices, saw its shares jump 11% on Thursday. The company announced plans on Wednesday to launch a $700 million debt offering to add more bitcoin to its coffers.
Other beneficiaries of bitcoin’s recent price surge include cryptocurrency exchange Coinbase (COIN), which rose 6% on Thursday, and bitcoin miner Marathon (MARA), whose shares gained more than 4%.
What’s next for Bitcoin?
Grayscale research director Zach Pandl said the Fed’s decision to cut rates came despite inflation risks remaining somewhat elevated.
“Central banks’ willingness to take risks with inflation tends to push investors toward store-of-value assets, like gold and Bitcoin,” Pandl said, adding that despite the choppy markets immediately following the announcement, “over time, Bitcoin will benefit from lower rates and a weaker dollar.”
A negative economic outlook from the Fed could lead to a reversal in bitcoin even if rates are cut further, Otunuga said.
