Bitcoin could be coming to life as the Federal Reserve cuts interest rates and the U.S. election approaches.
The cryptocurrency began 2024 with a sharp rally followed by a long pullback and consolidation. However some traders could see the potential for prices to start moving again.
The first potential catalyst is the U.S. Presidential election on November 5. Standard Chartered said this week Bitcoin could reach $73,800 before the polls, compared with its current price around $68,000.
Next is the ongoing bull market in risk assets like stocks. The S&P 500 crossed 5,800 last week, less than a month after passing 5,700. Just this week, UBS strategists raised their price target for this year and 2025.
Looser monetary conditions are another potential positive for cryptocurrencies. The Federal Reserve lowered interest rates 50 basis points last month and indicated it will cut another 50 basis points this year. (Its next meeting is just two days after the election.)
China has announced aggressive stimulus for its economy. Money market funds are also flush with cash, with data from the Investment Company Institute showing balances up nearly 7 percent since the end of May.
Next, the “stock to flow” model suggests Bitcoin could be due for an increase based on its last halving. This model, which tracks the current supply of Bitcoin relative to new coins being mined, now calculates a potential price around $320,000. The estimate climbs to $1 million by May 2025. In another supply-and-demand analysis, Cryptoquant shows fewer than 2.7 million Bitcoin tokens available on exchanges. That’s the lowest level since 2018, according to a September 17 analysis by Cryptoslate.
Traders should consider the risks of any cryptocurrency-based futures products which may carry additional risks.
Higher Lows?
The developments come at the same time TradeStation decided to lower day-trading margin rates for cryptocurrency futures. The change covered products associated with Bitcoin and Ether. Here’s a list of the symbols:
- CME Bitcoin Futures (@BTC)
- CME Ether Futures (@ETH)
- CME Micro Bitcoin Futures (@MBT)
Some traders may also think that Bitcoin is getting ready to move based on technical patterns. For example, it made a series of lower lows and lower highs between March and August. But its lows in September and so far in October have been higher. The highs have pointed upward as well. Could that suggest its long pullback is ending?
Despite the potential positives, at least one analyst thinks Bitcoin is potentially “fragile.” Illia Otychenko of CEX.IO told Decrypt yesterday that increased open interest and margin use could trigger a selloff if prices start falling. Otychenko noted that low volume could reflect decreased participation.
In conclusion, Bitcoin has been largely rangebound in 2024 as investors piled into AI stocks and now cyclicals. But some traders may see potential for the cryptocurrency to get active in coming weeks.
Cryptocurrency and cryptocurrency-based futures products are not suitable for all investors. Risks include but are not limited to extreme volatility, lack of liquidity, unlimited loss potential, and can be significantly affected by underlying cryptocurrency prices, world events, government regulations, and economic conditions, regardless of the length of time contracts are held. Cryptocurrency-based futures may carry many of the same underlying risks as owning cryptocurrencies, including but not limited to manipulation, fraud, and cybersecurity.
Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement visit www.TradeStation.com/DisclosureFutures.
Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at www.TradeStation.com/DisclosureMargin.
