PATNA (CoinChapter.com) — Bitcoin (BTC) price might have an explosive first quarter (Q1 2024) in the coming year if a prediction by investor Bill Ackman comes true. BTC price is yet to move above $38,500 despite a nearly 6-week-long bull run that saw Bitcoin price rally over 43% from Oct. 13’s low of $26,800.
Ackman, the founder of Pershing Square Capital Management, speculated that the Federal Reserve will change its stance on interest rates, going from hiking rates to reducing them as early as the first quarter of 2024.
The investor shared his views in an episode of “The David Rubenstein Show: Peer-to-Peer Conversations.“
In March 2022, the Federal Reserve embarked on an aggressive campaign of raising interest rates to combat rising inflation. The rate hikes continued, marking its fastest pace in four decades. Despite a broad slowdown in U.S. inflation this year, the Fed has yet to commit to any decision regarding rate cuts.
Furthermore, Ackman warned that there was a “real risk of a hard landing” if the Federal Reserve does not start cutting rates soon, since the interest rates currently outpace inflation.
Why Bitcoin Price Might Have an Explosive Q1 2024
When the interest rates decline, yields on bonds issued after the rate cut decline, which would make them less attractive to investors. Furthermore, lower interest rates can stimulate economic growth as it makes borrowing cheaper for businesses and individuals.
Additionally, the cut in interest rates could fuel a surge in Bitcoin’s demand. When traditional markets offer meager returns, investors often turn to higher yields in riskier assets like stocks and crypto. Bitcoin being the most visible of all cryptos, could benefit from the increased investor interest.
The chart above shows that BTC price has always registered an increase whenever interest rates have declined, highlighting the inverse relationship between the two.
For instance, when the interest rates dropped in early 2020, the Bitcoin price had an explosive run during Q4 of 2020. The resulting rally helped BTC price reach its ATH in Nov. 2021. Afterward, as interest rates rose, Bitcoin and the wider crypto market plummeted.
Another factor that would impact BTC price is market liquidity. Lower interest rates usually flood the market with capital. As such, investors end up with more funds for diverse investments, including cryptocurrencies.
Hence, the increased liquidity can lead to speculative investments in Bitcoin, potentially driving up its price.
BTC Price Faces Rejection Near $38,500
Meanwhile, Bitcoin price continued to face rejection near the $38,500 price level. Long upper wicks on recent daily candles highlight the bearish pressure near $38,500.
For Bitcoin price to explode in Q1 2024, bulls would need to break above the resistance near $39,000. Breaking and consolidating above the immediate resistance could help BTC price target the resistance near $41,500 before correcting.
If Ackman’s prediction does not bear fruit, bulls’ hope of Bitcoin price painting an explosive rally in early 2024 could come crashing down. As a result, BTC price could drop to the support near $36,380.
Moreover, breaching the immediate support could result in Bitcoin price testing the 50-day EMA (the purple wave) support near $34,500.
The RSI for BTC remained neutral, with a score of 62.27 on the daily charts.
