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Bitcoin Could Thrive Amidst Rising Interest Rates


In a month that has seen a decline in both stocks and bonds due to a spike in interest rates, Bitcoin appears to be bucking the trend. Despite uncertainty surrounding interest rates, this popular cryptocurrency has continued its upward trajectory.

During the first few days of October, Bitcoin experienced a 2.5% increase, reaching approximately $26,500, while the Nasdaq 100 index saw a mere 0.1% rise. Over the past month, Bitcoin has surged by about 7.4%, compared to a 4.2% drop for the Nasdaq 100.

Traditionally, Bitcoin and other digital tokens have performed similarly to tech stocks, benefiting from low interest rates and suffering when rates rise and impact investments that lack cash flow. However, this time may be different, according to Sean Farrell, an analyst at Fundstrat.

Farrell suggests that Bitcoin could actually thrive in a higher interest rate environment. In his research note published on Thursday, he pointed out that the cryptocurrency experienced a surge in prices back in March when financial institutions such as Silicon Valley Bank collapsed. Consequently, some investors may be buying tokens in anticipation of rising interest rates leading to further banking crises.

Conversely, if interest rates were to peak or even start to decline, Farrell argues that Bitcoin could still benefit along with other risky assets. The reason behind this is that falling rates tend to favor investments like cryptocurrencies, which do not generate income. According to Farrell, this creates an “asymmetric situation” that justifies increasing exposure to tokens as the fourth quarter begins.

The future of Bitcoin remains uncertain as interest rates continue to fluctuate. However, with its recent performance and the potential advantages it may hold in various interest rate scenarios, investors are keeping a close eye on this digital currency.

Bitcoin Prices Encountering Range-Bound Trading

Bitcoin prices have remained stagnant between the range of $26,000 and $28,000 for several months, causing a decline in interest from retail investors and a significant drop in trading volume at companies like Coinbase Global. However, there are indications that this trend might change in October, which has historically been a favorable month for Bitcoin prices, earning it the nickname “Uptober.”

SEC Decision to Impact Bitcoin ETF Market

By the end of next week, the Securities and Exchange Commission (SEC) is expected to make a crucial decision regarding the appeal of a ruling related to a Bitcoin exchange-traded fund (ETF). The court had previously found that the SEC had made an error in rejecting Grayscale Investments’ attempt to convert the Grayscale Bitcoin Trust (GBTC) into an ETF.

Should the SEC choose to appeal or find ways to delay the introduction of Bitcoin ETFs to the market, it could result in weakened token prices. Conversely, if the SEC signals its willingness to move forward with ETFs, analysts predict a potential influx of institutional investment worth tens of billions of dollars into this asset class.

While October typically proves favorable for Bitcoin prices, the final outcome may hinge more on court decisions than the calendar.

By Joe Light

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