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- Following the recent FOMC meeting, Federal Reserve officials are leaning toward a pause in future rate hikes, with many suggesting that additional hikes may not be necessary.
- Drawing parallels with the past, the dovish signals from the Federal Reserve, akin to early 2019, have raised hopes for a potential Bitcoin price rally.
During the FOMC meeting earlier this week on Tuesday, October 10, the Fed officials discussed the rate hike measures with most of them leaning towards a pause in future rate hikes.
This week, Federal Reserve policymakers delivered a more dovish message. On Tuesday, both Atlanta Fed Bank President Raphael Bostic and Minneapolis Fed President Neel Kashkari suggested that further rate hikes might not be necessary. Additionally, Dallas Fed President Lorie Logan and Fed Governor Christopher Waller argued that the recent increase in Treasury yields has essentially accomplished the Fed’s objectives, thus reducing the immediate need for another rate hike, as reported by Reuters.
These remarks have reinforced the market’s growing confidence that the Federal Reserve’s feared tightening cycle concluded with the 25 basis point rate hike in July. The prevailing sentiment is that the central bank will now adopt a watchful stance to assess how the macroeconomic landscape evolves in the coming months.
Also, the US CPI data and inflation numbers were out just a few hours ago. In September, the United States reported an unseasonally adjusted CPI annual rate of 3.7%, in line with expectations and matching the previous value of 3.7%. Meanwhile, the core CPI for the same period stood at an annual rate of 4.1%, consistent with expectations and down from the previous value of 4.3%. As the numbers seem to be quite on the expected lines, it reduces chances for any further rate hike from here.
Can Bitcoin See A 2019-Like 300% Price Rally?
In the last rate cycle, which spanned three years, the Federal Reserve’s interest rates reached their peak at 2.5% in December 2018. Afterward, the central bank adopted a cautious approach, waiting and observing for seven months. Interestingly, during this period, Bitcoin hit its low point in December 2018 and then surged to $13,880 by the close of June 2019.
The recent dovish statements from U.S. Federal Reserve officials have evoked memories of early 2019 when Bitcoin (BTC) recorded a remarkable surge of over 300% under a similar Federal Reserve backdrop.
Another noteworthy similarity is that the current halt in the Federal Reserve’s tightening cycle occurs a few months prior to the anticipated bullish event in the Bitcoin blockchain: the halving of mining rewards, much like what transpired four years ago. In a note to clients last week, Markus Thielen, head of research and strategy, said:
“Reflecting back on 2019, the Fed concluded its rate-hiking cycle and entered a seven-month pause. During this period, Bitcoin experienced a dramatic price rally, surging by an impressive 325%. In line with our outlook, it’s highly likely that the Fed concluded its rate-hiking cycle in July 2023.
At present, the most critical macroeconomic factor appears to be a reflection of the situation in 2019 when the Fed paused its rake hikes, leading to a significant surge in bitcoin prices”.
Thus, drawing up parallels from the past data, the Bitcoin price could pretty much rally going into the next year.
