Macro May Finally Be in Bitcoin’s Favor

Dreary macro factors have been a drag on bitcoin over the past year — but that might be changing.

The Federal Reserve raised interest rates by another 25 bps on Wednesday, and some believe that might’ve been the last hike for our current market cycle.

According to the CME Group’s FedWatch Tool, which tracks market expectations of future hikes, the Fed will likely begin cutting rates at the end of the year.

“If so, the market has already priced it, and it is very likely the Fed will manage a soft landing, and financial markets will continue to grow,” Ruslan Lienkha, chief of markets at Swiss-based crypto services firmYouHodler said.

At times, bitcoin (BTC) and ether (ETH) have reacted positively to the Fed’s hawkish stance toward monetary policy, at other times they’ve barely moved the needle at all.

Bitcoin’s price rose about 2% throughout Wednesday, topping out just below $29,200, although trade was choppy. BTC now hovers around $28,900.

“The probability that this was the last hike for this cycle is high, which could set up the market for another strong rally,” crypto financial services firm Matrixport said in a Thursday report.

The top crypto asset has been highly correlated with major tech stocks over the past year. While that measure has been falling of late, Matrixport reasoned stock buybacks that many anticipate could feed into risk assets like bitcoin — leading to a $36,000 target for bitcoin over the coming months.

“After the recent earnings season for US companies, stock buybacks are now resuming with expectations for $1 trillion in buybacks this year. This will continue to be a general tailwind.”

Bitcoin has thrived during US banking crises

Still, the likelihood that some US banks will need bailouts — or “liquidity injections” —- remains high, according to some analysts.

After a string of bank failures in March, shares in struggling LA-headquartered bank PacWest Bancorp went into freefall on Wednesday, shedding 56% in after-hours trading. 

Bloomberg first reported the bank is considering options including a sale on the same day, spooking investors.

“I think in the second half of the year [2023] we’re going to see the cumulative effects of the banking crisis really start to bite,” Jim Bianco of Bianco Research told Blockwork’s Jack Farley this week.

‘Stagflation’ could ensue, Bianco added. “We’re going to see sticky inflation, we’re going to see slowing growth.”

That may suggest a favorable outlook for crypto, which previously benefited from US and global bank sector uncertainty earlier this year, Matrixport added.

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