US Bitcoin Demand Surges as Fed Signals Rate Cuts, Reports CryptoQuant

The recent rise in Bitcoin’s price has been significantly influenced by a surge in demand from U.S. investors, according to CryptoQuant’s latest report. This increase comes after Federal Reserve Chairman Jerome Powell hinted at potential interest rate cuts, igniting enthusiasm in the cryptocurrency market.

Bitcoin Price Reaches New Highs

Last Friday, Bitcoin’s price surged by over 6%, reaching $65,000, the highest level since August 2. This rally coincided with a drop in U.S. government bond yields to their lowest levels since March 2023, further driving market optimism.

Increased U.S. Demand Evident on Coinbase

CryptoQuant’s analysis points to a significant spike in demand from U.S. investors, as evidenced by a noticeable premium on Bitcoin prices on Coinbase, a leading U.S.-based cryptocurrency exchange. This premium indicates that U.S. investors are willing to pay more for Bitcoin than the global average, reflecting strong local demand.

Additionally, there has been a noticeable influx of Bitcoin back into Coinbase from exchanges outside the U.S. Historically, such movements are associated with rising prices, suggesting that U.S. investors are increasingly dominating the market in anticipation of a more accommodative monetary policy.

Market Reactions to Potential Fed Rate Cuts

Arthur Hayes, co-founder of BitMEX, noted in a blog post that the market’s positive reaction to the Federal Reserve’s commitment to cutting policy rates is justified. Lower interest rates often lead to a rise in assets priced in fiat currencies with fixed supply, like Bitcoin.

Hayes also pointed out the risks associated with anticipated rate cuts by major central banks, including the Fed, Bank of England (BOE), and European Central Bank (ECB). He warned of the potential dangers of an unwind of the yen carry trade, which could destabilize markets unless offset by central bank balance sheet expansions.

Following Powell’s announcement, risky assets such as the S&P 500 Index, gold, and Bitcoin all saw price increases. Hayes remarked, “Powell delivered the pivot at roughly 9 a.m. GMT-6, which corresponds to the red oval. Risky assets… all rose as the price of money declined.”

Perpetual Futures Market Activity Increases

The surge in demand was not limited to spot markets. The perpetual futures market also experienced a significant uptick, with Total Open Interest—indicating the total number of outstanding derivative contracts—rising by nearly 10,000 Bitcoin following Powell’s statement. This brought the Total Open Interest to 276,000 Bitcoin, signaling a growing interest in leveraging futures contracts as part of investment strategies.

Broader Market Demand Still Lagging

Despite these positive signs, CryptoQuant reports that the overall demand growth for Bitcoin remains sluggish and has even turned negative in recent weeks. This is a stark contrast to earlier this year; in April, when Bitcoin was trading around $70,000, the demand was much stronger.

Current demand levels suggest that while U.S. investors are driving short-term price movements, a more sustained and widespread increase in demand is necessary for Bitcoin to fully recover and reach new highs.

As the market digests the Federal Reserve’s latest signals and prepares for potential rate cuts, Bitcoin’s price action will likely remain closely tied to developments in U.S. monetary policy and broader economic indicators.