Bitcoin Surges After Fed Hints at Interest Rate Adjustment, Short Sellers Suffer Heavy Losses

Bitcoin Surges After Fed Hints at Interest Rate Adjustment, Short Sellers Suffer Heavy LossesOn August 24, following Federal Reserve Chairman Jerome Powell's suggestion of a potential interest rate policy adjustment at the Jackson Hole Economic Policy Symposium, the price of Bitcoin surged. As of press time, data from Binance showed Bitcoin had climbed 5

Bitcoin Surges After Fed Hints at Interest Rate Adjustment, Short Sellers Suffer Heavy Losses

On August 24, following Federal Reserve Chairman Jerome Powell's suggestion of a potential interest rate policy adjustment at the Jackson Hole Economic Policy Symposium, the price of Bitcoin surged. As of press time, data from Binance showed Bitcoin had climbed 5.12%, trading at $64,212.91 per coin and hitting a high of $64,955, its highest level since August 2. This surge is attributed to increased demand for Bitcoin from US investors, closely linked to the Fed's policy shift.

Fed's Rate Cut Expectations Spark Demand, Bitcoin Premium Index Soars

Julio Moreno, Head of Research at CryptoQuant, highlighted on social media the significant rise in Bitcoin demand from US investors in response to the Fed's hint at an interest rate cut cycle. The Coinbase Bitcoin Premium Index (CoinbasePremiumIndex) reached its highest point in 39 days.

The Bitcoin Premium Index, a gauge of US investor demand, reflects the price difference between Coinbase and Binance exchanges. An increasing index typically indicates higher buying pressure in the US market, while a negative value suggests increased selling pressure.

It's noteworthy that this index had dipped below -0.10 prior to the "cryptocurrency black Monday" on August 5, when Bitcoin prices fell below $50,000.

Bitcoin Breaks Through $60,000 Mark, Liquidating Over $175 Million in Short Positions

Only hours before Powell's speech, Bitcoin prices hovered around $60,000. Some analysts had previously suggested that Bitcoin miners' mining costs were as high as $72,224 per coin, significantly exceeding the current Bitcoin price, potentially creating selling pressure. Crypto analyst Will Clemente also noted that despite seven days remaining in August, the market had consistently viewed Bitcoin prices below $60,000 as a valuable signal over the past six months.

However, the sudden surge in Bitcoin prices resulted in substantial losses for traders who had shorted Bitcoin. Coinglass data showed that over the past 24 hours, nearly 63,000 accounts across the network were liquidated, totaling $175 million, with liquidations of short positions reaching $134 million. Liquidations of short positions hit a new high since early August.

Bitcoin ETF Inflows Remain Strong, Ethereum ETF Faces Outflows

The much-anticipated Ethereum ETF has been trading in the US for a month - yet investors seem to remain relatively uninterested. The nine exchange-traded funds holding the second-largest cryptocurrency, Ethereum, have experienced seven consecutive days of investor outflows since August 15, marking the longest consecutive outflow period since its debut on July 23.

Data from SoSovalue reveals that over the same period, exchange-traded funds holding the leading cryptocurrency, Bitcoin, have experienced daily inflows. The divergence in fund flows signifies that Bitcoin ETFs are favored by investors. The data further indicates a net inflow of $251 million into spot Bitcoin ETF on Friday alone, the highest since July 16. Nearly $50 million flowed into BlackRock's iShares Bitcoin Trust (IBIT), Fidelity's FBTC and Grayscale's GBTC on the same trading day.

Noel Acheson, author of the "CryptoIsMacroNow" newsletter, stated, "Bitcoin is generally the 'gateway' cryptocurrency for traditional investors. While Ethereum will likely catch up eventually as diversification becomes more critical, Bitcoin is poised to continue performing well for now.

Regarding the divergence in funding, Stephen Oulette, co-founder and CEO of FRNTFinancial, remarked, I think it's not surprising that crypto ETF investors are de-risking a bit before and after Jackson Hole and with the rate expectations adjustments.

Summary

The Fed's suggestion of adjusting its interest rate policy sparked strong demand for Bitcoin from US investors, driving the Bitcoin price upwards, exceeding $64,000. Simultaneously, the significant liquidation of short positions reflects a shift in market sentiment. While the Ethereum ETF has been listed, investors appear to favor Bitcoin ETFs. This trend reflects Bitcoin's dominant position as the "gateway" cryptocurrency for traditional investors and the impact of Fed policy changes on the cryptocurrency market.