During the Jackson Hole Symposium, U.S. Federal Reserve Chair Jerome Powell hinted strongly at upcoming interest rate cuts, sending ripples through financial markets. The news drove Bitcoin (BTC) prices above $63,000, with analysts forecasting further gains as the Fed moves to lower rates.
Leena ElDeeb, a researcher at exchange-traded product issuer 21Shares, pointed out that previous rate cuts have historically been favorable for digital assets. ElDeeb highlighted the March 2020 rate cuts as a prime example. She noted that when the Fed reduced rates by 150 basis points at the onset of the COVID-19 pandemic, the total cryptocurrency market capitalization surged by approximately 450% by the year’s end, with Bitcoin’s price increasing by 200%.
ElDeeb tempered her analysis with a reminder that past performance does not guarantee future results, but she suggested that the 2020 rate cuts could serve as a useful benchmark for evaluating the potential impact of the upcoming reductions on cryptocurrency markets.
Additionally, ElDeeb discussed the role of the M2 money supply—a measure of the total currency in circulation—as a potential catalyst for Bitcoin price movements. She explained that Bitcoin’s price often hits a low several months before the M2 money supply bottoms out, typically experiencing a rapid surge before stabilizing in what she described as a “mid-cycle correction.”
She also identified Bitcoin exchange-traded funds (ETFs) as a significant driver of price appreciation within the M2 money supply cycle. Despite a $528 million outflow from digital asset investment products in early August, institutional interest in digital assets remains robust. Notable inflows were observed in BlackRock’s iShares Bitcoin Trust ETF and Fidelity’s Wise Origin Bitcoin Fund, totaling $20.3 million and $61.3 million, respectively.
Investment advisers have also increased their exposure to Bitcoin ETFs in the second quarter of 2024, further underscoring strong institutional interest in digital asset investment vehicles.
