Bitcoin (BTC) Price Will Probably Rise in the Coming Months, Here's Why

The US FED decided to cut interest rates by 50 basis points, which came as a surprise to many investors. After this, we immediately saw gold reach new

The US FED decision to cut interest rates by 50 basis points surprised many investors. Gold immediately reached new all-time highs as investors interpreted the rate cut as a sign of future inflation and dollar depreciation. The S&P 500 indexes also hit new all-time highs after the US FED decision, but interestingly, Bitcoin didn’t reach it.

Similarly, China followed suit, promising even more liquidity for the market, with many expecting a historically favorable Q4 for Bitcoin.

There are several reasons why this dynamic may not be as fast, ranging from the potential influence of institutional investors to the time needed for liquidity to reach the market and retail investors too.

Bitcoin’s Dynamics and Correlation with the Rest of the Market

It has been steadily declining since March 2024 and is about 15% below its previous and historical high.

This is a bit odd since usually when the S&P 500 index, and especially when gold does, Bitcoin also shows a rise. This was partly true, but in the context of lower rates, the correlation was not as strong as some expected.

We are seeing the S&P 500 rise, while Bitcoin is declining and this is not the first time we have seen this kind of divergence between the market and Bitcoin. We have seen this many times over the last five years and sometimes Bitcoin catches up to the S&P 500 and sometimes the S&P 500 declines approaching Bitcoin price levels.

This is why Bitcoin’s important dynamics need to be looked at beyond Q4, and to do that we need to look at one of the most important factors influencing the financial markets.

The US Dollar Index which shows the strength of the US Dollar against other major world currencies, has a big impact on the financial markets, and here’s what the US Dollar Index looks like lately.

Notice all the times it has declined significantly look at what has happened with bitcoin. In all of these cases, it has shown a sharp rise in price during and after these declines in the dollar index, and this is no accident.

A weak US dollar directly increases external demand for bitcoin, let’s say bitcoin is worth $60K on all major cryptocurrency exchanges, but suddenly the US dollar weakens by 5% against the Indian rupee.

This means that the same $60K bitcoin on the cryptocurrency exchanges becomes 5% cheaper for Indian investors, and this could lead to a significant number of Indian investors investing in Bitcoin which could potentially cause the price to skyrocket.

When the US dollar index falls this is not just against the Indian rupee but against all major currencies in the world and so when the US dollar weakens bitcoin becomes cheaper for the rest of the world, creating an increase in foreign investment in bitcoin.

So, recently we have noticed a slight weakening of the US dollar and if we overlay US interest rates on it we can see that now the US dollar is directly dependent on the level of interest rates which are experiencing a down cycle after the US Fed decision.

If the Federal Reserve continues to cut interest rates as they have stated they will likely lead to further weakening of the US dollar. However, despite the current weakening of the dollar bitcoin continues to bounce between $60K and $65K.

The Bitcoin price model shows that over the last six months, its price should have increased by about 100%, but in fact, it did not happen.

This price model is based on the US Ador and the S&P 500 index and gives us an idea of where Bitcoin should be right now this model shows that Bitcoin is undervalued 50%

This is not the first time that Bitcoin is undervalued according to this model and guess when it has been in the past this has already happened in January last year in September 2020 and in January 2019.

Perhaps the prolonged stagnation will continue, or there will be some volatility in the coming time, but in general, there are no critical indicators that say Bitcoin is definitely going to fall instead of the bullish rally we are all waiting for.

Why Should We Be Careful About Expecting a Bullish Rally?

Despite the reasonable optimism about Bitcoin, and the hope for the effect of China’s upcoming money printing, as well as the U.S., we should realize that it will likely take longer.

Let’s take a cold-blooded look at this point, namely that the cryptocurrency market could potentially be heavily influenced by institutional investors, so following the crowd can be risky.

After all, when everyone expects one thing, investment funds can do the opposite, and that is the key argument of counter-investors, which may now apply to the crypto market as well. So while many are saying that the fourth quarter will be highly bullish we should exercise a bit of caution first we need to talk about the main reason why everyone is so built on the fourth quarter.

China is printing

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