Bitcoin - The Fed Paves the Way for $100,000

Here we go, Jerome Powell has announced the rate cut from Jackson Hole. Bitcoin already welcomes this news by rising 5% in a few hours.

Jackson Hole

Jackson Hole is the major annual meeting of the Fed. It gathers many central bankers from allied countries. Traditionally, the Fed president uses this occasion to signal a major change in monetary policy.

For example, in 2010 Ben Bernanke revealed his intention to launch the famous “QE” (Quantitative Easing) there. In other words, printing money to buy public debt (and securities backed by mortgage loans). This speech caused a 28% rise in the stock market over the following eight months.

Mr. Bernanke gave another famous speech in 2012 to launch a third QE. It was also from Jackson Hole that European Central Bank President Mario Draghi announced the European QE. The European stock market appreciated by 27% over the next eight months.

While Jerome Powell had not used Jackson Hole for important declarations until yesterday, he was nevertheless relentless against inflation in his speech last year:

“Price stability is the responsibility of the Federal Reserve and the foundation of our economy. Without price stability, the economy does not work for anyone. […] The pains of high inflation weigh most heavily on those who are least able to bear them.

The rise in interest rates, the slowing of growth, and the deterioration of the labor market will lead to a reduction in inflation that will not be painless for households and businesses. These are the regrettable costs of reducing inflation. But failing to restore price stability would be far more painful.”

Bitcoin was waiting for this rate cut

Bitcoin appreciated by 5% following Jerome Powell’s speech. The euphoria is linked to this small phrase thrown in the middle of his speech:

“The time has come to adjust monetary policy. The direction is clear. The timing and pace of rate cuts will depend on incoming data, evolving outlooks, and balance of risks.”

🇺🇲 JUST IN: Fed Chair Jerome Powell declared at Jackson Hole, "THE TIME HAS COME FOR POLICY TO ADJUST," indicating a shift towards cutting interest rates.

The timing and pace will be based on economic data, with an emphasis on preventing higher unemployment.

🎥 Full speech: pic.twitter.com/lahO6VrPUs

— Beats in Brief (@beatsinbrief) August 23, 2024

Jackson Hole is always the favorite stage to signal a monetary tide change. After the central banks of Switzerland, Sweden, Canada, the Eurozone, and England, the Fed will also ease its monetary policy. The first rate cut will likely take place on September 18.

The markets had anticipated it, as suggested by ETFs. These show 11 days of positive inflows over the last 13 days.

The US stock market and gold are also close to record levels. And as we highlighted in this article, Bitcoin still shows a positive correlation with stock market rises. Added to this is now a return of global monetary mass growth (logical consequence of the rate cut):

Global M2 money supply has hit a new ATH

Whenever liquidity rises, $BTC price follows

This is a long-term chart so it could take weeks to play out! pic.twitter.com/oWz8tnbWuL

— Elja (@Eljaboom) August 21, 2024

Thus, after 25% inflation over the past three years (and more for food), things seem to be stabilizing. The global monetary mass will rise again and lift all asset prices.

The planets are finally aligning. Halving, ETF, accounting rules, endorsement by the Republican Party, and the potential creation of a strategic reserve of one million bitcoins by the US government. The path to $100,000 is clearing.

Not to mention that true inflation (not the one disguised by statistics institutes) is expected to remain high. On this subject, don’t miss our article: What Bitcoin will be and will not be.