US BTC Demand Spikes as Fed Signals Rate Cuts: CryptoQuant 

Bitcoin price spiked by over 6% experiencing a surge last Friday following remarks from Federal Reserve Chairman Jerome Powell, signalling that a phase of lower interest rates could be on the horizon, reports CryptoQuant in its weekly report.

Bitcoin hit $65,000, its highest level since August 2. This rally coincided with a decrease in the yields of U.S. government bonds, which fell to their lowest level since March 2023, further fueling the market’s enthusiasm.

Bitcoin Is Flowing Back Into Coinbase

The recent price surge was largely driven by a spike in demand from U.S. investors. CryptoQuant reports this is evidenced by the Bitcoin price premium on Coinbase, a leading cryptocurrency exchange, which rose to its highest point since July.

This premium indicates that U.S. investors are willing to pay more for Bitcoin than the global average, reflecting a strong local demand.

Additionally, Bitcoin is now flowing back into Coinbase from exchanges outside the U.S., a trend historically linked with rising prices. This movement suggests that U.S. investors are increasingly dominant in the market, seeking to capitalize on the potential benefits of a more accommodative monetary policy.

Fed Committing to Slashing Its Policy Rate Is Justified

Bitmex co-founder Arthur Hayes writes in a blog post that the initial positive market reaction concerning the Fed finally committing to cutting its policy rate is justified because investors believe that if money is cheaper, assets priced in fiat dollars of fixed supply should rise.

“We are forgetting that these future anticipated rate cuts by the Fed, BOE, and ECB reduce the interest rate differential between these currencies and the yen. The danger of the yen carry trade unwind will reappear and could derail the party unless “real food” in the form of central bank balance sheet expansion, aka money printing, raises the quantity of money,” writes Hayes.

“Powell delivered the pivot at roughly 9 a.m. GMT-6, which corresponds to the red oval. Risky assets represented by the S&P 500 Index (white), gold (gold), and Bitcoin (green) all rose as the price of money declined. The dollar, which is not shown here, also ended the week weaker as well.” —
Arthur Hayes from Crypto Trader Digest

Perpetual Futures Market Sees a Significant Uptick

The demand surge wasn’t confined to spot markets. The perpetual futures market also saw a significant uptick, with Total Open Interest—representing the total number of outstanding derivative contracts—increasing by almost 10,000 Bitcoin since Powell’s announcement, reports CryptoQuant.

This brings the Total Open Interest to 276,000 Bitcoin, highlighting the growing interest in leveraging futures contracts as part of the investment strategy.

CryptoQuant reports that despite these positive signals, the broader picture of Bitcoin demand remains less encouraging. Overall demand growth has been sluggish and has even turned negative in recent weeks.

This trend contrasts sharply with the situation earlier in the year; in early April, when Bitcoin was trading at $70,000, apparent demand was much stronger.

The current demand levels suggest that while U.S. investors are driving short-term price movements, a more sustained and widespread increase in demand is necessary for Bitcoin to recover fully and achieve new highs.