Bitcoin is currently hovering around the $43,000 mark with relatively stable prices over the past few days, coinciding with the holiday season and the start of the new year. Nevertheless, Bitcoin appears to be gearing up for a sustained upward trend over the next two years, as indicated by yield charts and the potential impact of the Federal Reserve’s actions. The cryptocurrency is showing signs of entering a bullish phase influenced by the Fed’s monetary policy and the potential macroeconomic environment in 2024.
Michaël Van de Poppe, the founder of MN Trading, has pointed out a bearish divergence in the yield curve of 2-year and 10-year Treasury bonds. The Profit chart has reversed, and technical indicators are signaling a positive trajectory. Yield curve inversion typically refers to short-term interest rates becoming higher than long-term rates, reflecting economic instability or weak growth prospects. Analysts highlight significant weekly bearish divergence in government bonds, indicating market pessimism based on economic figures.
Van de Poppe suggests that the current yield trend is a preemptive response to FOMC’s monetary policy decisions. The tightening of interest rates has concluded, and November’s inflation figures, reported by Bloomberg, falling below the Fed’s annual 2% target for the first time in over three years, bode well for the FED. This development has boosted market sentiment during the holiday season, with expectations of interest rate cuts in the coming year.
The overall positive impact of the Fed’s rate cuts on the crypto and technology stock markets is evident, as they help reduce borrowing costs for companies. Bloomberg reported in September 2023 that Bitcoin once again moved in sync with tech stocks after a brief decoupling in June. Therefore, advancements in technology and cheaper financial sources are poised to propel Bitcoin’s surge after a year of price volatility.
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Van de Poppe also notes that the market’s price movement follows a similar yield curve trend as seen in 2018, reflecting the current market trajectory. With favorable macroeconomic factors indicating the potential for Bitcoin’s price increase, the market is also approaching the halving event in the coming months. As of December, Bitcoin has reached its highest point this year, reaching around $44,000, marking a 160% increase. However, this price is still 37% lower than the all-time high of $69,000 achieved in 2021.
Following the initial impact of the halving, historical data indicates that Bitcoin has consistently experienced gains in the post-halving period, establishing itself as a market reality. Additionally, optimism is closely tied to the potential approval of the first Bitcoin spot ETF as we enter the new year. Many in the crypto community anticipate a surge in retail investments should the ETF be greenlit for market entry.
It’s crucial to acknowledge that Bitcoin’s price dynamics are influenced by a intricate interplay of economic and regulatory factors. Nevertheless, the overarching trend seems to hold promise for the upcoming year and beyond.
