Bank of England 0.25% Rate Cut Stirs Potential Bitcoin Breakout

The Bank of England has announced a 0.25% interest rate cut, lowering the rate to 5%. This move concludes one of the longest periods of heightened interest rates and is primarily driven by a significant decrease in inflation, which has dropped from 8% to 2% over the past year. The rate cut, the first since March 2020, could potentially benefit Bitcoin, as easing monetary policy has historically boosted risk assets like Bitcoin and gold.

While there is speculation of further rate cuts later this year, possibly in November, Bank of England Governor Andrew Bailey emphasized caution to avoid cutting rates “too quickly or by too much.” Despite the current inflation target of 2%, inflation is expected to rise slightly in the coming months.

US Monetary Policy Impact

Despite the Bank of England’s rate cut, Bitcoin’s price remains subdued below the $65,000 mark. This sluggish price action may be attributed to the United States Federal Reserve’s decision to hold its key lending rates steady in August. However, significant new liquidity and upward momentum for Bitcoin could be seen with a potential US rate cut in September.

According to CME’s FedWatch tool, there is an 86.5% chance that the Federal Reserve will lower its rate to 5.00% – 5.25% in September, down from the current 5.25% – 5.50%. Federal Reserve Chair Jerome Powell indicated that a rate cut could occur as soon as September, contingent on strong economic data.

Powell emphasized the need for more positive data on inflation and the job market before easing borrowing conditions. The recent ADP report showed slower job growth, with only 122,000 new jobs added in July, below the expected 150,000, and an annual pay increase of 4.8%. This weak data, along with a significant drop in 10-year U.S. bond yields, suggests decreased confidence in future economic growth, reinforcing expectations for a rate cut.

Crypto Whales Accumulate Bitcoin

Despite the uncertainty surrounding further rate cuts, recent Bitcoin whale accumulation shows confidence in the cryptocurrency. Large Bitcoin holders, or addresses owning at least 0.1% of BTC’s circulating supply, accumulated over 84,000 BTC in July, valued at over $5.4 billion. This is the highest accumulation since October 2014, when Bitcoin reached 11-month lows.

This strategic accumulation, driven by bargain-hunting during the early July price dip below $55,000 and pauses during the recovery to $69,000, indicates a strong belief that the prolonged consolidation phase between $50,000 and $70,000 will eventually end with a bullish breakout. This sets an interesting precedent for Bitcoin’s price action in the coming months, highlighting high-potential investment opportunities.