Why Rate Cuts Can’t Guarantee Bitcoin Revival
The post Why Rate Cuts Can’t Guarantee Bitcoin Revival appeared on BitcoinEthereumNews.com.
BitMex founder Arthur Hayes says rate cuts are not enough to help Bitcoin (BTC) regain its footing as the pioneer cryptocurrency struggles below the psychological level of $60,000. The influence of US macroeconomics on Bitcoin has resurfaced, with crypto responding to developments from policymakers. Bitcoin Would Need More Than Just Rate Cuts Arthur Hayes challenges the belief that rate cuts alone — whether from the US Federal Reserve, the Bank of England (BOE), or the European Central Bank (ECB) — would drive Bitcoin’s price upward. He questions the assumption that lower interest rates automatically lead to higher value for riskier assets. While Hayes acknowledges that rate cuts often negatively correlate with the value of risk-on assets, he argues that such cuts would primarily reduce the interest rate differential between currencies like the USD, GBP, EUR, and the Japanese yen, rather than significantly boosting Bitcoin’s value. “The danger of the yen carry trade unwind will reappear and could derail the party unless “real food” in the form of central bank balance sheet expansion, aka money printing, raises the quantity of money,” Hayes wrote. Carry trading occurs when traders short futures while simultaneously buying the underlying asset. They aim to profit from price differences between the spot and futures markets. Read more: How to Protect Yourself From Inflation Using Cryptocurrency Hayes suggests that if the yen strengthens, it could prompt traders to unwind their dollar-yen carry trade positions. He argues that while rate cuts might temporarily stabilize markets, they could also speed up the narrowing of the interest rate differential between the dollar and yen. This would, in turn, strengthen the yen further and lead to more unwinding of carry trade positions. “We have a battle between the positive vs. the negative forces. Given that the amount of global financial assets financed…
Filed under: News - @ August 29, 2024 2:27 pm