- Bitcoin and major cryptocurrencies saw gains this week, with Ethereum notably outpacing BTC.
- The gains were largely fuelled by the US Federal Reserve’s decision to cut interest rates by 50 basis points, the first reduction since 2020.
- Although the market responded positively, concerns persist about the sustainability of this rally due to its dependence on futures and perpetual markets.
- Analysts suggest that the upcoming US Presidential election could further influence crypto prices.
Bitcoin and others had a good past few days, with the OG crypto gaining over 8% in the past week. Most major cryptos followed BTC’s lead, with some, like Ethereum, outpacing the number one coin.
Ethereum is up 15.5% in the past seven days, while BNB gained 13.7%, Solana 9.7% and Dogecoin 8.1% – while XRP has been flat, only up 0.28% in the same time.
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Much of these gains stem from the US Fed reducing interest rates for the first time since 2020, with a substantial drop of 50 basis points.
Analysts at Kaiko wrote in a note that the Fed cut could help with a soft landing and triggered the crypto market to rally.
The move revived hopes of a soft landing in the US – a slowdown in growth without triggering a recession. In response, both US equities and Bitcoin posted solid gains following the FOMC meeting, with Bitcoin (BTC) prices rising 5.2% within 24 hours of the announcement.
Kaiko If In Doubt, Zoom Out
But is that rally sustainable? A report by exchange Bitfinex suggests it may not be, at least in the short to medium term. They wrote that despite the recent gains, BTC is just below the crucial US$65,200 (AU$95,263) level from late August.
Failure to surpass this mark could spell trouble, according to Bitfinex:
If BTC does not breach this level, it will confirm a pattern we have seen since the all-time high of $73,666 in March, with Bitcoin failing to surpass any prior high before forming a new local bottom, maintaining a downtrend.
Bitfinex Looking at the broader trend, Bitcoin’s movement since March is downward.
Additionally, the recent rally may be driven more by futures and perpetual markets than by actual spot trading, raising concerns about the sustainability of the price increase.
According to Bitfinex, a counter-argument to that bearish outlook is that continuing inflows into Spot Bitcoin exchange-traded funds (ETFs) could keep the price of BTC afloat.
VanEck Offers Unusual Insights for US Election Outcome
Both Kaiko and Bitfinex highlighted the potential influence the US Presidential election in November could have on the crypto market. And while we have heard many times that Donald Trump may be the better president for the crypto sector, fund manager VanEck has a slightly different view.
VanEck Head of Digital Assets Research, Matthew Sigel, wrote that Kamala Harris and Donald Trump present different implications for Bitcoin and the broader digital asset markets, although both are bullish for Bitcoin.
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According to Sigel, a Harris administration might tighten US digital asset regulations, potentially slowing institutional adoption but possibly boosting Bitcoin due to increased structural challenges driving its adoption.
On Bitcoin alone, however, we would argue that a Kamala Harris presidency might be even better for Bitcoin than a second term for Trump because it would, in our view, accelerate many of the structural issues that drive Bitcoin adoption in the first place.
Matthew Sigel, VanEck Conversely, a Trump administration could deregulate more, likely benefiting the entire crypto ecosystem, especially entrepreneurs.
Regardless of who wins, the ongoing fiscal deficits and national debt are expected to weaken the US dollar, a condition under which Bitcoin typically flourishes, Sigel added.
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