Bitcoin surpasses $40,000 on optimism over Fed rate cut

by Jonathan Adams
Bitcoin

The crypto currency added 2.7 per cent to $40,521.0, extending gains following a three-week rally

Bitcoin rose past $40,000 a dollar for the first time in 2023 on Monday on growing optimism over an early interest rate cut by the Fed, while focus also remained on the potential approval of a spot ETF for the token.

The world’s largest crypto currency added 2.7 per cent to $40,521.0, extending gains following a three-week rally. The token reached $40,825.0 earlier in the day- its highest level since May 2022, before the collapse of the stablecoin Terra sparked an over year-long rout in crypto currency markets.

Ethereum gained 1.9 per cent to $2,210.49- its highest level since May 2022.

A key point of support for bitcoin and crypto prices was weakness in the dollar, as growing expectations for an early interest rate cut by the Federal Reserve triggered a rally in risk-driven assets.

Markets saw recent comments from Federal Reserve Chair Jerome Powell as decidedly less hawkish, as he flagged a growing need for balance between keeping monetary conditions tight and still fostering a soft landing for the U.S. economy.

This saw traders begin pricing in a more than 90 per cent possibility that the Fed will keep rates on hold in December, and a more than 60 per cent possibility it will cut rates by March 2024. The Fed is set to meet on December 12 and 13.

The prospect of lower interest rates bodes well for bitcoin, given that easy monetary policy and increased speculative trading saw the crypto currency hit a record peak of around $69,000 in 2021.

It had since dropped drastically as interest rates increased, while the crypto industry was also wracked with a series of high-profile bankruptcies and regulatory clampdowns.

Still, bitcoin has more than doubled in value this year, with most gains coming in recent weeks as investors bet over the potential approval of a U.S. exchange-traded fund that directly tracks the price of the crypto currency.

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