Coinbase has expressed an optimistic outlook for Bitcoin heading into the fourth quarter of 2024, underpinned by increased liquidity resulting from recent policy measures in the U.S. and China. Analysts from the exchange note robust demand for Bitcoin, hovering around $65,000.
Impact of Interest Rate Cuts
In a recent report, Coinbase analysts highlighted the recent interest rate cuts by the U.S. Federal Reserve. They suggest that this reduction not only boosts available capital but also enables other monetary authorities to implement more aggressive stimulus measures. "The decrease in the bank reserve requirement, in particular, should be beneficial for market liquidity," Coinbase's report states. It indicates that this measure is positively correlated with BTC performance. In China, additional fiscal and monetary stimulus has been introduced, including interest rate cuts and a reduction in the reserve requirement ratio for banks, aiming to boost lending and alleviate credit burdens.
Positive Economic Signals
Coinbase cautions that the impact of increased liquidity on Bitcoin and the broader cryptocurrency market may not be immediate or sustained. The exchange anticipates a possible delay in these measures positively affecting market performance, despite observing signs of economic strength. "We anticipate a constructive fourth quarter in 2024 due to U.S. rate cuts and significant fiscal and monetary stimulus from China, which should improve market liquidity and support BTC performance," the exchange team says. The U.S. economy continues to exhibit resilience, with second-quarter GDP growth rates exceeding expectations at 3.0% compared to the forecasted 2.9%. This performance supports Coinbase's view that short-term recession risks remain low.
Cryptocurrency Market Conditions
With improved conditions, Coinbase also addressed upcoming East Coast port strikes, which could pose challenges for the economy in the fourth quarter, although their impact on inflation is expected to be minimal. In the cryptocurrency market, recent monetary easing in the U.S. and China have positively affected both stocks and cryptocurrencies. Futures market data shows stable financing rates and open interest levels close to six-month averages. This supports the view that the market is well-positioned for October, historically a strong month for Bitcoin. Adding to the positive outlook, the recent approval of Bitcoin ETFs in the U.S. is seen as a favorable development. Coinbase believes that these financial instruments could enhance institutional adoption and liquidity, bolstering the cryptocurrency market’s prospects for the upcoming quarter.
In conclusion, recent developments in economic and monetary policy create favorable conditions for Bitcoin growth. If these trends continue, the cryptocurrency market may see a positive end to the year.
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