Monetary Policy

Bitcoin may be decoupling from concerns about a US recession and aligning more closely with the US dollar’s performance and signs of easing monetary policy, according to ETC Group. 

The bearish environment that dominated the crypto markets in early August may have set the conditions for a “tactical bottom for Bitcoin,” supported by expectations of looser monetary policy in the United States.

According to an analysis from asset manager ETC Group, sentiment around crypto assets dropped in August to its lowest point since the FTX collapse in November 2022, driven by rising concerns over a recession in the US and a sudden appreciation of the Japanese yen.

Recession fears, however, quickly evolved into expectations of a reversal in the Federal Reserve’s monetary policy. If the Fed begins easing its policy, meaning lowering interest rates or injecting more money into the economy, it could create a more favorable environment for Bitcoin (BTC), as a looser monetary policy generally encourages more risk-taking and investment in assets like cryptocurrencies.

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