Bitcoin hits new all-time high due to rising market expectations of a September interest rate cut

Author: Danny Park; Compiler: Centreless

Bitcoin briefly broke through $124,000 today, surpassing its previous all-time high, driven by rising market expectations for a September rate cut and continued strong institutional demand.

According to The Block's Bitcoin price page, the world's largest cryptocurrency by market capitalization rose 3.64% to $124,347 around 8:30 PM ET. The price has since retreated and is currently trading at $123,868.

"Bitcoin's rise to a new all-time high is primarily driven by strong market optimism about a September rate cut, with the CME FedWatch tool currently pricing in a 93.7% probability of a rate cut," said Min Jung, an analyst at Presto Research.

Market optimism further intensified after the release of the latest US Consumer Price Index (CPI) data, which showed a lower-than-expected 2.7% year-on-year increase in US consumer prices in July. However, the core CPI, which excludes food and energy prices, rose 3.1% year-on-year, slightly exceeding expectations. Despite this, a shift to easing policy by the Federal Reserve is by no means guaranteed. Fed Chairman Jerome Powell has stated that the central bank is prioritizing 12-month inflation data, so rising core inflation could remain a potential concern even if headline inflation readings cool. "Bitcoin prices are likely to remain highly sensitive to any positive or negative developments related to the September interest rate decision," Min-Jung noted. Expectations of a rate cut have also pushed Ethereum prices close to their all-time highs reached in 2021. According to The Block's Ethereum price page, the cryptocurrency is currently up 2.3% at $4,717. Meanwhile, Rachael Lucas, a cryptocurrency analyst at BTC Markets, said Bitcoin's price rise is driven by a "perfect storm" of institutional demand from spot exchange-traded funds (ETFs) and corporate treasury.

"In the past month, Bitcoin spot ETFs have attracted more than $3.6 billion in funds, and companies and sovereign wealth funds currently hold a total of 3.64 million bitcoins, accounting for more than 17% of the total." Lucas said, "Coupled with long-term strategic holdings, we are facing a collision between structural demand and limited supply."

BTC Markets analysts believe that Bitcoin is expected to maintain its upward momentum before the end of the year, and the price may consolidate in the range of $120,000 to $125,000 in the short term.

"The combination of scarce supply and strong structural demand supports the potential for further increases before the end of the year." Lucas said, "Long-term holders are confident, and Bitcoin and Ethereum are increasingly being regarded as core portfolio assets."