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Bitcoin Range-bound as Federal Reserve Maintains Steady Interest Rates

3 Feb 2024, 00:48,

Bitcoin steady as the U.S. Federal Reserve opts to keep its benchmark fed funds rate range unchanged at 5.25% to 5.5% and ETFs continued to witness strong volume

After two weeks of a slow downtrend following the approval of the Bitcoin Spot ETFs, Bitcoin staged a mini-recovery earlier this week reaching $43,707 on Wednesday – a 9% increase over the previous seven days. The recovery was short-lived, however, with Bitcoin falling 2.65% late Wednesday to $42,412, after the first FOMC meeting for the year left rates unchanged. Bitcoin ranged between 42K and 43K for the remainder of the week. 

The decision to leave interest rates unchanged was widely expected and unanimous, keeping the target range for the federal-funds rate at 5.25%-5.50%. The Federal Open Market Committee’s (FOMC) policy statement did not suggest there are more interest-rate increases to come, but policymakers aren’t talking about cuts just yet either. Fed Chairman Jerome Powell began his post-meeting press conference by reiterating that inflation is “still too high,” later adding that a March rate cut wasn’t likely. As a result, Bitcoin and other risk assets dropped in response. 

Bitcoin spot ETFs have continued to see strong volumes, with heavier outflows from the Grayscale Bitcoin Trust (GBTC) on Wednesday than earlier in the week. These totaled around 8,400 BTC ($380 million). However, Blackrock and Fidelity continue to lead the charge amongst the other spot ETFs, with $266 and $205 million respectively, in in-flows on Wednesday.

ETF fees have also seen activity – with Invesco and Galaxy Asset Management being the latest to drop fees on their ETF — Invesco Galaxy Bitcoin ETF (BTCO) — announced Tuesday that its eventual expense ratio will be 0.25%, down from 0.39%. The fee drop brings it to the same level as BlackRock, Fidelity, Valkyrie, and VanEck. BTCO has zero fees for the first six months or until it hits $5 billion in assets, after which the lower fee will go into effect.

Even with the ETF approvals, a Deutsche Bank survey of 2,000 retail clients shows Bitcoin still has a way to go before mainstream acceptance. A third of respondents said they thought Bitcoin would drop below $20,000 by year-end, while more people said Bitcoin will disappear in the coming years than those who believe it will survive. More education is needed, and it’s hoped that ETF providers will help with this process.

Anthony Scaramucci

Skybridge Capital founder Anthony Scaramucci

The next Bitcoin Halving will take place in April, 2024. The number of new Bitcoins created via the block reward is reduced by half every four years. The halving will reduce the amount of Bitcoins produced each day from 900 to 450. This supply shock, combined with new flows from the ETFs is expected to provide strong tailwinds for Bitcoin later in 2024.

Skybridge Capital founder Anthony Scaramucci has predicted that Bitcoin will reach $170,000 after the halving in April. “Go and look at Bitcoin halving cycles,” Scaramucci said on the Scott Melker podcast. “The day that Bitcoin halves, multiply it by four [and] 18 months later, it’s been uncanny that that’s been the price of Bitcoin.” “I’m using a $35,000 number at the halving and that’s conservative … Let’s say we’re at $50,000 in April, then it’s a $200,000 handle. Let’s say we’re at $60,000, it will be $240,000,” Scaramucci said.





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