Bitcoin Moves Up, as the Fed Gets Ready to Cut

Bitcoin rallied on Friday, following gold and tech stocks as the Fed finally gets ready to cut rates.

On Friday, cryptocurrencies surged, with Bitcoin (BTC) nearing the $60,000 threshold, bolstered by substantial gains across traditional markets.

Source: BNC Bitcoin Liquid Index

This price movement coincided with a rise in U.S. stocks, as the S&P 500 came within less than 1% of its July record high shortly before the market closed. Gold continued its record-breaking streak, reaching $2,600 per ounce for the first time ever. A decline in the U.S. dollar against major currencies further supported rallies across most asset classes.

The Fed Will Cut Rates, Finally

A significant event to watch next week is Wednesday’s Federal Open Market Committee (FOMC) meeting, which is expected to mark the Federal Reserve’s first interest rate cut since 2020. Observers remain divided on the cut’s magnitude, with probabilities nearly evenly split between a 25 basis point and a larger 50 basis point reduction, according to the CME FedWatch Tool.

Early in the week, it was nearly certain that the U.S. Federal Reserve would trim its benchmark fed funds rate by just 25 basis points. However, this expectation has swiftly shifted. Despite the robust employment picture suggested by last week’s August jobs report and the stickier-than-hoped inflation indicated by this week’s CPI and PPI reports, the calculus has changed due to one news article.

Wall Street Journal reporter Nick Timiraos—occasionally referred to as “Nikileaks” due to his excellent sources inside the Fed—published an article on Thursday afternoon suggesting that the decision on the rate cut’s size was still up for debate.

“Federal Reserve Chair Jerome Powell faces a difficult decision as the central bank prepares to cut interest rates next week: Start small or begin big?” wrote Timiraos, suggesting the both options were very much on the table.

Following the article, the chances of the Fed implementing a 50 basis point cut next week—per CME FedWatch, which tracks positions in short-term interest rate markets—increased to more than 40% from percentages in the high teens just days earlier. At press time, the odds had risen slightly further to 45%.

This news may have also contributed to the quick turnaround in the U.S. stock market on Thursday afternoon, which closed with decent gains after earlier losses. Bitcoin (BTC) rose to about $58,500, its highest in more than a week.

Generally, easier monetary policy is assumed to be beneficial for risk assets, including Bitcoin. However, in Bitcoin’s current bear phase, assumptions can quickly change. Some analysts have suggested that if the Fed accelerates rate cuts—signaling concern about a struggling economy—it might drive prices even lower.

While uncertainty remains over whether the Federal Reserve will cut its benchmark lending rate by 25 or 50 basis points next week, it’s certain that the U.S. central bank will embark on its first easing cycle since 2019. In doing so, the Fed will join other major Western central banks—the European Central Bank, the Bank of England, and the Bank of Canada—all of which have already cut interest rates, some more than once. While Japan hasn’t joined in and has actually taken initial steps toward tightening, its benchmark policy rate of 0.25% is only a few basis points above zero.

MicroStrategy Doubles Down

In other news, MicroStrategy (MSTR) has added 18,300 bitcoins (BTC) to its multibillion-dollar holdings. The new purchase was made at an average price of $60,408 per token, Executive Chairman Michael Saylor announced in an X post on Friday morning, boosting the company’s holdings to 244,800 BTC. MicroStrategy’s cost basis for these holdings is $9.45 billion, or an average price of $38,585 per bitcoin. At the current price just under $58,000, the stash is now worth about $14 billion.

Source: X

Saylor further stated that the company has achieved a BTC yield of 4.4% so far this quarter on its holdings and 17% year-to-date. BTC yield is a metric developed by MicroStrategy to describe the percentage change over a given period of the ratio between the company’s bitcoin holdings and its assumed diluted shares outstanding. MicroStrategy began purchasing bitcoin in 2020 and has continued to add to its holdings since. Data from BitcoinTreasuries shows that it is the largest holder of the asset among all publicly listed companies worldwide.