Will Bitcoin Price Explode After Bank of England Cuts Rates?

The latest interest rate decision of the Bank of England may bring more upward momentum to the price of Bitcoin.

On August 1, the Bank of England announced a 0.25% interest rate cut to the current 5%, ending one of the longest interest rate hike cycles in history.

The Bank of England cuts interest rates. Source: Bank of England

Bitcoin prices could benefit from an unexpected rate cut as economists are divided on whether the central bank will cut rates or keep them on hold.

Easy monetary policy has historically boosted risk assets such as Bitcoin and gold, but despite the rate cuts, Bitcoin prices have remained range-bound.

Bitcoin price remains below $65,000 amid U.S. monetary policy

Despite the UK’s first interest rate cut in four years, the price of Bitcoin remains below the $65,000 mark.

As of 11:20 a.m. UTC on Aug. 1, Bitcoin was down 2.4% in 24 hours, trading at $64,507, according to CoinMarketCap, while trading essentially flat over the past week.

BTC/USD, one-month chart. Source: CoinMarketCap

The subdued price action can likely be attributed to the Federal Reserve’s decision to keep its key lending rate unchanged in August.

However, Bitfinex analysts noted that with the September rate cut in the United States, Bitcoin prices could see significant new liquidity and upward momentum:

“A rate cut in September will generate optimism and could generally increase market liquidity, which is positive for Bitcoin and other cryptocurrencies as investors seek higher returns outside of traditional assets. This could lead to upward pressure on Bitcoin prices and increased ETF inflows as investors look to take advantage of a more favorable environment for risk assets.”

Slowing Bitcoin ETF Inflows Put Pressure on BTC Price

Slowing inflows into U.S. spot Bitcoin exchange-traded funds (ETFs) could also be behind Bitcoin’s lackluster price action.

According to Farside Investors, U.S. ETFs accumulated just $300,000 worth of Bitcoin on July 31, while on July 30 they had cumulative net outflows of more than $18.3 million.

Bitcoin ETF flow chart (millions of US dollars). Source: Farside Investors

ETF inflows can significantly boost cryptocurrency price appreciation. In the case of Bitcoin, ETFs accounted for around 75% of new investment in the world’s largest cryptocurrency as of Feb. 15, when the price of Bitcoin surpassed the $50,000 mark.