Key Points
- Bitcoin’s price is struggling to stay above $62,000 despite a positive European equity rally.
- The Bank of England’s potential summer rate cut has not boosted Bitcoin’s value as expected.
Despite the recent surge in European stocks to record highs, Bitcoin remains below the $62,000 mark. This is surprising given that the Bank of England (BoE) has hinted at a potential summer rate cut, a move that is traditionally seen as positive for riskier assets like Bitcoin.
European and UK stock markets had a positive day on Thursday. London’s FTSE 100 reached a new all-time high, closing at 8,393 after a 22-point gain. The broader European Stoxx 600 index also had a positive day, rising 0.15% to 516.
Bitcoin’s Struggles Amid Positive Market Sentiment
Despite this positive sentiment in traditional markets, Bitcoin has been unable to capitalize on it. The world’s most popular cryptocurrency has been hovering above the $62,000 mark.
The Bank of England has chosen to maintain interest rates at their current level of 5.25% for the sixth consecutive meeting. This reflects the central bank’s cautious stance on inflation. However, Governor Andrew Bailey has suggested a rate cut as soon as next month if inflation falls in line with their forecasts.
“We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months,” Bailey said. “While we need more evidence of sustained low inflation before a rate cut, I’m optimistic things are moving in the right direction.”
Despite the prospect of a summer rate cut, analyst Myron Jobson of Interactive Investor tempers expectations. He emphasizes that a broader environment of higher-for-longer interest rates is unlikely to disappear anytime soon.
“Interest rates could remain higher for the next decade than they were in the decade after the 2008 financial crisis,” said Jobson. This could dampen the appeal of Bitcoin, which has historically thrived in low-interest-rate environments.
Persistence of Bitcoin’s Post-Halving Volatility
The Bitcoin halving event, which ended on April 20th, cut the block mining reward by half. These halving events have often led to significant price rises. For example, the 2012 halving saw a 9,500% price increase, and the 2016 event resulted in a 3,000% jump the following year. However, the 2020 post-halving rally was more modest, with Bitcoin appreciating by 650%.
Before the recent halving, Bitcoin experienced a volatile 110% price increase. The week leading up to the event saw a sharp 17% dip from $72,000 to $60,000. Contrary to expectations, the post-halving rally has not materialized. Bitcoin briefly reached $67,000 on April 24th but quickly fell back to $62,500 within three days.
This ongoing volatility has forced Bitwise, an asset management firm, to advise caution, suggesting the halving event might have been a “sell the news” scenario. Analysts from JPMorgan and Deutsche Bank share this view, projecting that Bitcoin could drop as low as $42,000 in the coming weeks.
