Today is the day that the Fed cuts rates again. How fast are they willing to go?
Beaver Bulletin · September 18, 2024 · By Andrew Throuvalas
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1. The Federal Reserve will convene later today to revise its benchmark interest rate, and every financial market – including Bitcoin – is watching with suspense.
Federal Reserve Chairman Jerome Powell already confirmed last month that “it’s time” for rates to come down, as U.S. unemployment is starting to look like a bigger short-term threat than inflation.
The question is how aggressive the central bank will be: will they cut rates by a standard 25 basis points, or show urgency with a historically rare 50 basis point raise?
As of Saturday, CME FedWatch showed that interest rate traders had the odds priced in dead even at 50/50 – and they’ve been fluctuating ever since.
Predictions of a larger cut have grown more credible lately as articles from both the Financial Times and Wall Street Journal last week suggested that the Fed has been on the fence about what move to make.
On one hand, a 50-point cut could allow the Fed to move faster toward its goal protecting the labor market, being extra safe with its goal to achieve a ‘soft-landing’ after battling inflation.
It’s also U.S. election season, making some think the Fed will do what it can to keep the market pumped and voters happy. In fact, Democratic Senator Elizabeth Warren told the Fed this week to lower rates by 75 points, claiming they’re already ”behind the curve” on pivoting.
That said, a major cut might be unnecessary – and could even spook the markets into thinking something is wrong.
A half-percentage cut is not “necessarily 100 percent guaranteed to be well-received or to instil confidence”, said former Fed Vice Chair Richard Clarida to FT. “They can trigger the view of, ‘Wow. What do they know that we don’t know?’”
For this reason, Bitcoin investors could interpret a jumbo cut in two ways. It could trigger the market to crash alongside stocks in the short term for fears of some systemic financial implosion. But in the long run, it also means cheaper money, which will always drive up the value of scarce assets like BTC.
As we highlighted last week, Bitcoin’s price almost always picks up the pace again in the fourth quarter, following a slow September. Don’t overthink it, and stack as much as you can before the money printers go into overdrive.
2. The Kingdom of Bhutan now holds over $750 million in Bitcoin earned solely through Bitcoin mining.
That’s right – there’s a South Asian country whose government has been mining Bitcoin on the down-low for years.
Sitting on 13,000 BTC, the nation has well surpassed the 5875 BTC held by El Salvador, where BTC is a form of legal tender. What’s more the population of Bhutan is just 790,000, compared to El Salvador’s 6.3 million.
Blockchain sleuths at Arkham Intelligence tracked down Bhutan’s wallet on Monday, which is directly linked to mining operations carried out by Druk holdings – the government’s investment arm.
Arkham explained that Bhutan’s mining facility is built atop the site for its now-defunct Education City project. “We were able to corroborate the timeline of on-chain mining activity with time-lapse satellite imagery of facility construction,” they explained, noting that mining activity ramped up starting in early 2023
Bhutan’s BTC holdings represent a quarter of the country’s entire GDP, which is forecasted to reach $3 billion by the end of 2024. The country’s success illustrates how profitable hydroelectric mining can be in the most unsuspecting locations, and how geographically decentralized mining is for securing Bitcoin.
3. MicroStrategy (MSTR) is raising billions more dollars to buy BTC. Michael Saylor announced on Friday that his company had acquired another 18,300 BTC for $1.11 billion, bringing its total holdings to 244,800 BTC.
His firm also proposed another offer for $700 million in convertible debt on Monday, which will be used to both roll over the company’s previous debt, and also to purchase even more Bitcoin.
Saylor revealed that the company’s shareholders are now entitled to 17% more BTC per share than they were at the start of the year, meaning MSTR investors have effectively earned “yield” next to their standard Bitcoin ETF counterparts.
4. Bitcoin’s crypto market dominance has reached 58%, with the size of the asset now four times that of Ethereum.
The runner-up crypto – which was celebrated years ago as something that would one day overtake Bitcoin – has lost half of its value against BTC ever since its coveted “Merge” upgrade, which occurred exactly two years ago this week.
Proponents claimed that the Merge would turn ETH into “ultrasound money” that was better than BTC in every way.
But the market has spoken: the ETH/BTC ratio has now collapsed below 0.04 for the first time since April 2021 – and even BlackRock’s new Ethereum ETF has done nothing to save it.
Remember: everything trends to zero against Bitcoin.
Stay humble,
Andrew
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