Bitcoin rose back above $38,000 on Wednesday, fueled by hopes that the US Federal Reserve is getting closer to decreasing borrowing prices if inflation remains low.
The largest cryptocurrency by market capitalization surged up to 3.3% to $38,264 before paring the gains. On Friday, Bitcoin reached an 18-month high of $38,422. Lower interest rates, in general, boost investors’ appetite for risky assets like digital tokens.
“As interest rates begin to fall, investors will return to risk assets in search of higher returns,” said Michael Safai, a partner at quantitative trading firm Dexterity Capital. “This, coupled with the momentum that crypto has built in recent months with ETFs and putting FTX in the rear-view mirror, has traders feeling like the conditions for a new bull run are coming together.”
The current slowing of economic activity, according to Federal Reserve Governor Christopher Waller, may imply that the central bank’s policy is tight enough. He delivered the statements as part of planned remarks for an event at the American Enterprise Institute in Washington on Tuesday.
Bitcoin has risen more than 40% since the beginning of October on expectations that the US Securities and Exchange Commission will approve the first exchange-traded fund that invests directly in the digital commodity. Bitcoin is up over 130% this year after falling 64% in 2022.
The confidence has also boosted so-called crypto equities including Coinbase Global Inc., miner Marathon Digital Holdings Inc., and ETF proxy MicroStategy Inc. This year, the shares of all three companies have increased by more than 250%.