Recent changes in Fed's interest rates and political scenarios have influenced the Bitcoin market. Institutional investor involvement is also noteworthy.
Impact of Federal Reserve's Policies on Bitcoin
Amid the Federal Reserve's interest rate cuts, Bitcoin and other assets received a liquidity boost. The rate reduction by 50 basis points to a range of 4.75%-5.00% in September 2024 marks the end of a rate-hiking cycle that began in 2020. Concurrently, U.S. President Donald Trump’s economic strategies aim to bolster the national economy, including proposals for a national Bitcoin reserve.
Institutional Interest in Bitcoin
Institutional interest in Bitcoin has surged significantly due to ETFs, which now hold over 5% of Bitcoin's total supply. The increase in Bitcoin holdings by these funds reflects growing interest from large financial companies, such as MicroStrategy. Such institutional backing suggests Bitcoin is being increasingly recognized as a vital component of corporate strategies.
Future Prospects of Bitcoin
With current volatility and economic uncertainties, some experts warn that surplus liquidity could lead to financial instability. However, others believe market dynamics may drive new technological advancements, reminiscent of past internet booms. Countries like El Salvador and the Central African Republic have adopted Bitcoin as legal tender, leveraging its properties as a hedge against inflation.
While Bitcoin's future remains uncertain, its fixed supply and decentralized attributes continue to position it as a potential store of value.
