Bitcoin Price May See Boost from UK Interest Rate Cut

The Bitcoin price might experience upward momentum in response to the latest interest rate decision by the Bank of England. On August 1, the central bank announced a 0.25% cut in interest rates, reducing the rate to 5% and marking the end of a prolonged period of elevated rates.

This surprise rate cut could potentially benefit Bitcoin (BTC), as economists were divided on whether the bank would lower or maintain its rates. Historically, easing monetary policy tends to uplift risk-on assets such as Bitcoin and gold. Despite this, Bitcoin’s price remains range-bound, hovering below the $65,000 mark.

Bitcoin’s Price Action Remains Subdued

Even with the Bank of England’s rate cut—the first in over four years—Bitcoin’s price has remained subdued. As of August 1, the cryptocurrency fell 2.4% to $64,507 in the 24 hours leading up to 11:20 am UTC, following a week of relatively flat trading, according to CoinMarketCap data.

The lackluster price action could be partly due to the US Federal Reserve’s decision to keep its key lending rates unchanged in August. Analysts from Bitfinex suggest that a potential US rate cut in September could be a game-changer:

“A rate cut in September would likely foster a bullish sentiment and increase market liquidity, which would be beneficial for Bitcoin and other cryptocurrencies as investors seek higher returns outside traditional assets. This could exert upward pressure on Bitcoin’s price and attract increased ETF inflows as investors aim to take advantage of a more favorable environment for risk assets.”

Impact of Slowing Bitcoin ETF Inflows

Another factor contributing to Bitcoin’s sluggish price could be the deceleration in inflows into US-based spot Bitcoin exchange-traded funds (ETFs). On July 31, US ETFs accumulated only $300,000 worth of Bitcoin, while experiencing over $18.3 million in cumulative net outflows the previous day, according to Farside Investors.

ETFs play a significant role in driving cryptocurrency price appreciation. For instance, by February 15, ETFs were responsible for about 75% of new investments in Bitcoin, which had helped propel its price past the $50,000 mark.

The Bank of England’s recent interest rate cut introduces a potential catalyst for Bitcoin’s price, though the cryptocurrency remains constrained by other factors such as the current US monetary policy and slowing ETF inflows. As investors watch for further developments, particularly in US interest rate decisions, Bitcoin could see renewed liquidity and upward momentum in the coming months.