Fed Has ‘Limited Firepower’ for Rate Hikes, Current Expectations Already Priced in for Bitcoin - CoinShares.
The US Federal Reserve (Fed) has “limited firepower” to raise interest rates due to high oil prices and a threat of recession -- and this could lead to higher bitcoin (BTC) prices, the crypto research and investment firm CoinShares has said. Meanwhile, others also remain positive for the long-term, saying bitcoin’s network effects make it likely to succeed.
Writing in a piece published on the CoinShares blog on Thursday, James Butterfill, the company’s Head of Research, said that he believes current interest rate expectations are “already factored into the current Bitcoin price.”
“Bitcoin now has a well-established inverse correlation to the US dollar. This makes sense due to its emerging store of value characteristics, but it also makes it incredibly sensitive to interest rates,” Butterfill wrote.
He added that the price declines seen in bitcoin over the last 6 months can “by and large be explained as a direct result of an increasingly hawkish rhetoric from the Fed.”
The article further pointed out that bitcoin’s correlation to gold has declined over the course of 2021 and 2022, while the correlation with stocks – and in particular the more rate sensitive growth stocks – has risen “significantly.”
Still, there is a rising risk of recession in the US that the Fed must take into consideration, Butterfill argued. He said that some economic indicators, including wage growth and purchasing manager indices, have begun to “roll over.”
Additionally, Butterfill pointed to rising oil prices as “the most worrying indicator” for both the US and global economies. Sharp rises in demand and prices for oil have “almost always” been followed by economic recessions in the US, Butterfill warned.
Fed Has ‘Limited Firepower’ for Rate Hikes, Current Expectations Already Priced in for Bitcoin - CoinShares.
The US Federal Reserve (Fed) has “limited firepower” to raise interest rates due to high oil prices and a threat of recession -- and this could lead to higher bitcoin (BTC) prices, the crypto research and investment firm CoinShares has said. Meanwhile, others also remain positive for the long-term, saying bitcoin’s network effects make it likely to succeed.
Writing in a piece published on the CoinShares blog on Thursday, James Butterfill, the company’s Head of Research, said that he believes current interest rate expectations are “already factored into the current Bitcoin price.”
“Bitcoin now has a well-established inverse correlation to the US dollar. This makes sense due to its emerging store of value characteristics, but it also makes it incredibly sensitive to interest rates,” Butterfill wrote.
He added that the price declines seen in bitcoin over the last 6 months can “by and large be explained as a direct result of an increasingly hawkish rhetoric from the Fed.”
The article further pointed out that bitcoin’s correlation to gold has declined over the course of 2021 and 2022, while the correlation with stocks – and in particular the more rate sensitive growth stocks – has risen “significantly.”
Still, there is a rising risk of recession in the US that the Fed must take into consideration, Butterfill argued. He said that some economic indicators, including wage growth and purchasing manager indices, have begun to “roll over.”
Additionally, Butterfill pointed to rising oil prices as “the most worrying indicator” for both the US and global economies. Sharp rises in demand and prices for oil have “almost always” been followed by economic recessions in the US, Butterfill warned.