Bitcoin rise if U.S. rate cuts?…"Previous pattern may not hold"

Ahead of a December rate cut by the U.S. Federal Reserve (Fed), Bitcoin (BTC) investors are expecting a resumption of the risk-asset rally, but analysis shows that the bond and foreign-exchange markets are pointing in a completely different direction.

On the 2nd (local time), CoinDesk reported, "The Fed is expected to cut the policy rate by 25bp on December 10 to the 3.5~3.75% range, and normally expectations of a rate cut lower U.S. Treasury yields and weaken the dollar, creating a favorable environment for risk assets including Bitcoin. However, recently the bond and dollar markets have not shown these typical responses."

The 10-year U.S. Treasury yield remains firmly in the 4% range, and has actually risen about 50bp since the first rate cut in September. The outlet diagnosed that "the United States' massive fiscal deficits, increased Treasury supply, and persistent inflation concerns are preventing yields from falling." Added to this, the possibility of a rate hike by the Bank of Japan (BOJ) and rising Japanese Government Bond (JGB) yields are strengthening global upward pressure on yields.

The dollar index has also shown insensitivity to rate-cut expectations. The weakness that continued since April paused around the 96 level in September, and has since rebounded, repeatedly testing the 100 level. This is interpreted as the market having already priced in most of the easing signals and the relative resilience of the U.S. economy suppressing dollar weakness.

The fact that bond yields and the dollar are not falling as much as expected suggests the past simple manual 'Fed easing → dollar weakness → strength in risk assets' may not operate. CoinDesk urged caution, saying, "Bitcoin investors need to pay closer attention to changes in the macro environment."