Will Bitcoin’s Price Surge Following Bank of England’s Interest Rate Reduction?

The recent decision by the Bank of England marks its first interest rate cut in more than four years, with the previous cut occurring in March 2020.

Bitcoin’s price might experience upward momentum in response to the British central bank’s latest monetary policy decision.

The Bank of England announced a reduction of 0.25% to bring the interest rate down to 5% on August 1. This change concludes one of the most extended periods of increased interest rates.

The price of Bitcoin (BTC) could respond positively to this unexpected interest rate reduction, as experts were divided on whether the bank would implement a cut or maintain the existing rates. Historically, such easing of monetary policy tends to favor riskier assets like Bitcoin and Gold. However, despite this recent development, Bitcoin’s price has remained relatively stable.

Bitcoin’s Price Under Pressure Below $65,000 Amid U.S. Monetary Policy

Currently, Bitcoin’s price is constrained below the $65,000 threshold despite the UK’s recent interest rate adjustments.

As of August 1, Bitcoin decreased by 2.4%, trading at $64,507 around 11:20 am UTC after a week of largely stable performance, according to CoinMarketCap data.

This muted price action may be influenced by the United States Federal Reserve’s choice to keep its key lending rates unchanged in August.

However, analysts from Bitfinex have suggested that a potential U.S. rate cut in September could provide crucial liquidity and drive Bitcoin’s price upward. They noted:

“A rate cut in September would provide a sense of bullishness and could generally increase liquidity in the market, which will be positive for Bitcoin and other cryptocurrencies as investors seek higher returns outside traditional assets. This could lead to upward pressure on Bitcoin’s price and increased ETF inflows as investors look to capitalize on a more favorable environment for risk assets.”

Declining Bitcoin ETF Inflows Contributing to Price Pressure

The diminishing inflows seen in U.S. spot Bitcoin exchange-traded funds (ETFs) may also play a role in Bitcoin’s lackluster price performance.

The U.S. ETFs accumulated only $300,000 worth of Bitcoin on July 31, contrasted by significant outflows amounting to $18.3 million on July 30, as reported by Farside Investors.

ETF inflows can significantly impact the price of cryptocurrencies. For example, ETFs accounted for approximately 75% of new investments in Bitcoin as it crossed the $50,000 milestone by mid-February.