The valuation of Bitcoin has been on a gradual yet consistent downward trajectory since our previous update, and for the first time in over two months, it passed $60,000 and continued downwards. At the time of writing, however, Bitcoin has finally begun to regain some lost ground as it is nearing the $62.000 level again. Bitcoin hodlers have a lot of good things to look forward to now that we've put the halving behind us, but the big question is when we will get further tailwinds in the form of interest rate cuts. The fact that BlackRock's exchange-traded Bitcoin fund had its first day of net outflow on Wednesday speaks to the times we're in.
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The first 100 days following the election of a new president in the United States is often subject to intense scrutiny, with administrations putting a lot of emphasis on accomplishing as much as possible during this three month+ period. Consequently, the first 100 days post the recurring and significant Bitcoin halving event, which coincidentally aligns with a U.S. election year, have garnered increasing attention. The general consensus is that the year and a half following the halving date will be favorable. Following the halvings in 2012, 2016, and 2020, Bitcoin reached its peak approximately 1.5 years later. However, it has been equally certain that the initial 100 days post-halving have historically been characterized by considerable volatility and uncertainty for Bitcoin and by the looks of it, this time is no different.
In the 100 days following the 2016 halving, Bitcoin’s value decreased by 20% at its worst, and on the 100th day, it was down by a few percentage points. In contrast, during the first 100 days after the 2020 halving, Bitcoin’s lowest point was a decline of just over one percent, and on the 100th day, it had increased by over 36%. It is crucial to remember that prior to the 2020 halving, the Federal Reserve had already reduced the interest rate to the 0 - 0.25% range and initiated quantitative easing to stimulate the economy.
It is equally important to note that unless we observe positive developments in the data points frequently cited by Jerome Powell, which we have written about before, it is unlikely that we will see a reduction in interest rates in the near future. Following the Federal Reserve’s interest rate meeting on Wednesday, where interest rates remained unchanged, Powell reiterated that the data they rely on is not trending the way they would like it to, making imminent and additional rate cuts this year improbable. In other words, Bitcoin will not get a boost from the Fed during the first 100 days post halving as what happened in 2020.
Norwegian stock exchange commentator, Karl Johan Molnes of Finansavisen commented yesterday on potential interest rate cuts in the U.S. this year (in Norwegian): “As the election draws nearer, it will become increasingly difficult to reduce the interest rate. It likely wont occur in June, there is always a possibility of a cut in June for political reasons, but inflation is rising. They cannot cut in July, as it falls between the two national conventions, so that can be ruled out. And in September, the election campaign will be in full swing, with only 7 weeks remaining until the election, so that too can be ruled out. A cut in November is also unlikely, as it’s only 3 days post-election and the winner may not even yet be confirmed.”
The fact that interest rates most likely won't be reduced is something Bitcoin-hodlers has felt first hand. The Bitcoin ETFs have thus far been a positive influence on Bitcoin’s price since their launch on January 11th, but the tide has recently turned. For instance, BlackRock’s IBIT recorded its first day of net outflows on Wednesday, according to Farside. From last Wednesday through yesterday, the cumulative ETF flow for ETFs has been negative, culminating in $1.23 billion in net outflows. It now appears that the ETFs, which have previously been a positive price driver for Bitcoin, is now contributing to its decline.
This text is intended to inform and is not an investment recommendation.
Best regards,
Adam Jakobsen.
NBX.
