Bitcoin Investors Pin Hopes on Federal Reserve's Discreet Rate Reductions

By Omkar Godbole (All times ET unless indicated otherwise) A key topic of discussion among bitcoin bulls is the potential for the Federal Reserve to implement 'stealth' interest-rate cuts, potentially leading to a return to zero rates, similar to the 2020-21 period. This previous zero-rate environment triggered a significant bull run across financial markets, including smaller altcoins. New research from the Federal Reserve Banks of New York and San Francisco indicates a 9% likelihood of the benchmark fed funds rate reaching zero within the next seven years. Although current data suggests elevated interest rates, the possibility of a zero rate remains substantial over the medium to long term. In the short term, the probability of rates falling to zero in the next two years is only 1%. However, a single black swan event, such as the Covid crash, could prompt the Fed to reconsider zero rates. Currently, rates remain at 4.25%, with traders expecting a single 25 basis-point cut for the remainder of the year. The central bank has been implementing discreet rate cuts by easing liquidity through measures such as reducing the 'enhanced supplementary ratio' and freeing up money for banks to purchase Treasury notes, according to Alexander Blume, CEO of investment adviser Two Prime. Additionally, the Treasury has expanded its buyback program, injecting more capital into the economy, Blume noted. As a result, some large traders are anticipating renewed bullish volatility and investing in the $130K bitcoin call option on Deribit. U.S.-listed spot bitcoin ETFs have registered net inflows for the third consecutive day, and traders are also pursuing bullish futures bets in XRP. In other news, Bit Digital has completed its strategic Treasury shift to ether following a $172 million public equity raise and the sale of 280 BTC. Dubai has approved the QCD Money Market Fund, a joint product from Qatar National Bank and DMZ Finance. Australia-listed crypto fund manager DigitalX has raised A$20.7 million to increase its BTC holdings. Patrick Hansen, Circle's EU strategy director, has revealed that 53 companies have obtained licenses in the six months since the European Union implemented the MiCA crypto-asset regulation, indicating strong demand for compliance-friendly products. Tether, the issuer of the world's largest dollar-pegged stablecoin, has not yet applied for a license. In traditional markets, the yield on the Japanese 30-year government bond has risen to 3.11%, the highest since May 22, signaling renewed volatility in government bonds across advanced nations. Remain alert. Key Events to Watch Token Events Conferences The CoinDesk Policy & Regulation conference is a one-day boutique event in Washington on Sept. 10, allowing general counsels, compliance officers, and regulatory executives to meet with public officials responsible for crypto legislation and regulatory oversight. Space is limited; use code CDB10 for 10% off registration through July 17. Token Talk By Shaurya Malwa Derivatives Positioning Market Movements Bitcoin Statistics Technical Analysis Crypto Equities ETF Flows Spot BTC ETFs Spot ETH ETFs Source: Farside Investors Overnight Flows Chart of the Day While You Were Sleeping In the Ether