As global markets grapple with the ebb and flow of inflation data, the crypto space is dealing with the increased volatility. US banking giants are initiating the reporting season coincides with a surge in Bitcoin. The biggest crypto, BTC, recently topped $45,000 amid anticipation of potential approval for spot Bitcoin exchange-traded funds (ETF) by the Securities and Exchange Commission (SEC).
Bitcoin ETF and BTC surge
Bitcoin’s rally into the new year mirrors its late 2023 performance. It was fueled by optimism that the SEC may greenlight ETFs soon. However, the market is abuzz with expectations of an imminent SEC decision, with speculations that approval could unleash a fresh wave of capital into the crypto industry. These kind of sentiments have contributed to Bitcoin’s impressive 2023 gains of over 155%.
Despite the increased optimism, Bitcoin has already recorded a correction in its 2024 gains. This move has left analysts with a question about the level of demand for a Bitcoin ETF and whether the anticipated approval is already factored into current prices.
What does the veteran suggest?
According to reports, JPMorgan bond veteran Bob Michele shared insights into the Federal Reserve’s potential moves. He hinted at a scenario where the Fed completes 10, 25 basis-point rate cuts in 2024. However, this would exceed the market consensus of about six cuts.
Michele pointed out that the Fed’s pivot is driven by a belief that inflation is approaching its target, providing room to bring down real yields. The potential rate cuts aim to foil a rise in the real fed funds rate as inflation subsides.
The report added that Michele also highlighted a key risk possibility of a hotter-than-expected economy leading to a resurgence in inflation. While the Fed has seen a soft landing with inflation around the 2% target and unemployment at 4% sustaining this balance remains challenging. The risk of a rapidly changing economic ground could necessitate a reassessment of the rate-cut scenario.
In the banking sector, major banks, including JPMorgan Chase, Bank of America, and Citigroup, are set to unveil their fourth-quarter and full-year results on January 12. This might impact the Federal Reserve’s rate hikes, with increased interest payments offsetting challenges in dealmaking revenue.
As crypto enthusiasts eagerly await the SEC’s decision on Bitcoin ETFs, the correlation between traditional financial and crypto markets becomes increasingly evident.
