Bitcoin gains ground following dovish FOMC minutes

Bitcoin has been trading within a narrow range of between $59,900 to $61,000 following the release of Federal Open Market Committee meeting minutes for July.

Within hours of the FOMC minutes being released at 2:00 p.m. ET on Wednesday, the price of bitcoin climbed steadily to briefly touch the $62,000 mark. Since then, the largest digital asset by market capitalization has pulled back to hover above $61,000. 

There has also been a shift in the bitcoin perpetual futures funding rate, which turned positive — suggesting a shift in investor sentiment toward a more optimistic outlook.

The bitcoin perpetual futures funding rate has turned positive. Image: Coinglass

Increased likelihood of a rate cut in September

The Federal Reserve minutes for July have been interpreted as being dovish and supporting the likelihood of a rate cut in September. "The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting," the summary of the minutes stated. According to the CME FedWatch tool, there is now a 67.5% probability of a 25 basis point cut and a 32.5% chance of a 50 basis point cut at next month's meeting.

Risk assets such as stocks and cryptocurrencies are particularly sensitive to interest rate changes, as lower rates can make them more attractive by reducing borrowing costs and encouraging investment.

Presto Research analyst Peter Chung outlined factors contributing to the recent cryptocurrency market rebound. Besides the dovish FOMC minutes, Chung pointed to Wednesday's revised employment figures from the U.S. Labor Department that suggested greater economic fragility. "A record downward revision in payroll and the dovish FOMC minutes last night triggered a rally across risk assets," Chung said, adding: "The yield curve steepened, the DXY is now down, and small caps and bitcoin are up."

The analyst also cited a recent ABC report stating that Robert F. Kennedy Jr. plans to withdraw from the presidential race by the end of this week and endorse Donald Trump. Both candidates have a pro-crypto stance. "Topping up the positive sentiment was the news that Robert Kennedy Jr. is likely to drop out and endorse Trump instead, further helping his winning odds," Chung added.