Bitcoin and cryptocurrency prices have soared this year as the U.S. dollar index hits year-to-date lows, with the Coinbase CEO recently unveiling an AI breakthrough.
The bitcoin price is currently hovering around $60,000 per bitcoin, up from January's lows of under $40,000, as traders anticipate that a new liquidity boost from the Federal Reserve could push the bitcoin and crypto market to the "cusp" of a significant move.
Now, with China preparing to unleash a bitcoin price bombshell, concerns are mounting that the U.S. dollar is "on the verge of a total collapse," positioning bitcoin for "a critical tipping point."
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Schiff, the founder of Euro Pacific Asset Management and a known bitcoin and crypto skeptic, recently commented that "the index could easily sink below 90 before year-end, challenging the 2020 low." He added, "I believe that low will be breached in 2025, triggering a U.S. dollar crisis, crashing the economy, and causing consumer prices and long-term interest rates to soar."
Last month, Fed Chair Jerome Powell delivered a speech at the annual economic symposium of central bankers in Jackson Hole, Wyoming, where his dovish tone signaled a potential interest rate cut in September, leading to a decline in the U.S. dollar.
"It’s been a tough summer for the greenback," said Neil Roarty, an analyst at investment platform Stocklytics, in an emailed statement. "As recently as April, the dollar's dominance seemed unstoppable as it surged against almost all global currencies. Now, it’s at 2024 lows against the euro, the pound, and the yen."
Minutes from the Federal Open Market Committee's (FOMC) July meeting revealed that policymakers are more dovish than previously anticipated, suggesting that interest rates could decline sharply after soaring to 23-year highs under the Biden administration, as inflation reached levels not seen since the 1980s.
The Fed is now widely expected to begin a rate-cutting cycle at its two-day monetary policy meeting starting on September 17.
"There’s now speculation that [interest rates] might drop faster than initially predicted," Roarty noted. "As much as 100 basis points could be shaved off current rates by the end of the year. This will dampen dollar expectations for the rest of 2024, but it’s crucial to monitor how other central banks respond. That critical rate gap—the difference in interest rates between countries—could drive significant currency volatility in the coming months. Brace yourself for what could be a bumpy ride."
In Europe, both the European Central Bank (ECB) and the U.K.'s Bank of England are expected to implement further rate cuts after initiating loosening cycles in recent months. However, uncertainty surrounds the Bank of Japan, which sparked a global market meltdown in July with an unexpected interest rate hike.
Meanwhile, the momentum that bitcoin built during the first half of 2024 has waned, raising doubts about its performance for the remainder of the year.
"While we remain optimistic about the mid- to long-term prospects of digital assets, the current evidence suggests caution is warranted," wrote Markus Thielen, CEO of 10x Research, in an emailed note.
"Despite near V-shaped rebounds following dips in early May, early July, and early August, the underlying market structure and fundamentals have weakened over time. As a result, each dip has become deeper, and the recoveries have been less robust. The latest end-of-month data indicates that we may be approaching a critical tipping point in September, marked by a decline in demand."
Other bitcoin and crypto market analysts have raised concerns about bitcoin's historically poor performance in September.
"September has traditionally been a negative month for bitcoin, with data showing an average value drop of 6.56%," said Innokenty Isers, founder of the U.K.-based bitcoin and crypto exchange Paybis, in an email. He noted that recent negative investor sentiment has driven bitcoin's price down from its recent highs.
"However, if the Fed cuts interest rates in September, it could help bitcoin break its negative trend. Rate cuts typically lead to an increased flow of U.S. dollars into the economy, which reduces the dollar's purchasing power and enhances bitcoin's appeal as a store of value. Many institutional investors are already supporting this view by accumulating significant amounts of bitcoin. If the Fed's actions weaken the dollar, a shift toward risk assets with higher growth potential could become inevitable. Overall, macroeconomic indicators, the adoption of spot bitcoin exchange-traded funds (ETFs), and a favorable hash rate might make September a better month for bitcoin this quarter."
The bitcoin price rally this year has been fueled by the long-anticipated arrival of spot bitcoin ETFs on Wall Street.
Bitcoin ETFs from BlackRock and Fidelity, which debuted in January, have quickly become some of the fastest-growing ETFs of all time.