Bitcoin (BTC) surged by over 7.5% on May 15, experiencing its most significant single-day rise in almost two months, reaching $66,250. This surge was a result of weak US economic data, which raised expectations of a Federal Reserve (Fed) interest rate cut in September. The potential rate cut would make alternative investments like altcoins more attractive due to lower borrowing costs for fiat currencies.
Fed Expected to Cut Interest Rates
The US Department of Labor released data on May 15 indicating lower than anticipated consumer price index (CPI) growth in April. This suggests a decline in living costs, with the core CPI also showing a decrease. Additionally, US retail sales figures for April were disappointing, leading to increased market expectations of a Fed rate cut. Investors now foresee a 25 basis points interest rate cut in September, with the Fed signaling a slowdown in quantitative tightening measures as well.
Other Central Banks Following Suit
Not only the Fed, but market participants also expect the Bank of England (BOE) and the European Central Bank (ECB) to reduce interest rates in June. The Swiss National Bank (SNB) and Sweden's Riksbank have already lowered their benchmark borrowing costs. This global trend towards monetary easing is seen as favorable for risk assets like Bitcoin and altcoins, boosting market liquidity.
Data from MacroMicro shows a decrease in central banks raising interest rates and an increase in those lowering rates, indicating a shift towards rate cuts worldwide. This transition could improve market liquidity. Pepperstone, a brokerage firm, agrees with this perspective, anticipating increased liquidity over the summer to support equities. This favorable environment for higher-risk investments contributes to the significant price increases observed in Bitcoin and altcoins recently.
