Bitcoin (BTC) price at $100,000?

Typically, a greater flow of new dollars to target lower interest rates inflates the prices of stocks and fixed income bonds.

Since the advent of cryptocurrencies, financial markets have discovered that this new asset class is particularly responsive to and inversely correlated with interest rates.

Correlation detected: Bitcoin and interest rates

A recent report from the Fidelity Active Investor Learning Center notes, “Although central banks do not control cryptocurrencies, some crypto analysts have noted that the US central bank in particular may be indirectly influencing the price of cryptocurrencies.”

Meanwhile, according to a report by SPGlobal, the three-month daily correlation between interest rates and the crypto index has shown an inverse relationship 63% of the time since May 2017. This correlation increases to 75% of the time since May 2020.

China, Canada and South Africa on the brink of tariff cuts

When the US suspended the direct convertibility of dollars into gold in 1971 to prevent a massive outflow of the yellow metal from its economy, it created a free-floating foreign exchange market.

This has a direct influence on the profitability of imports/exports and the balance of trade between major international trading partners. As a result, the Fed’s move to ease rates soon gives China room for cuts.

Between US policy favorability of a Chinese interest rate cut and a deflationary trend in the yuan that threatens to fizzle out, yuan watchers expect a change in monetary policy soon.

Bank of Canada Governor Tiff Macklem said in a recent interview that the country’s central bank is prepared for larger rate cuts than those introduced earlier this year.

Meanwhile, South African rand watchers expect the country’s Reserve Bank to announce an interest rate cut later this week.

“Soft Landing” Could Boost “Hard” Money Like Bitcoin

As monetary engineers at the Fed and other central banks prepare to ease economies into another soft landing, Bitcoin and other cryptocurrencies have responded with enthusiastic optimism.

BitMEX founder and crypto influencer Arthur Hayes recently said that he thinks the USD money printer triggering a new round of rate cuts will dramatically increase the price of BTC.

He emphasized that the monetary influence on BTC will materialize quickly and the results will be spectacular.

“They’re going to expand the money printer and dramatically increase the money supply,” Hayes said. “This leads to inflation, which could be bad for certain types of businesses. But for assets with finite supply like Bitcoin, it will provide a trip to the speed of light 2 Da Moon!”

Hayes closed out his short Bitcoin position earlier this month and admitted he made only a modest profit.

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