Bitwise CIO says Powell’s remarks could spark a new Bitcoin bull run

Bitwise CIO urges investor to not 'fight the feds' as Bitcoin prepares for 'new era.'

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

Bitwise CIO Matt Hougan believes that US Federal Reserve Chair Jerome Powell’s recent dovish comments could ignite a new bull market for Bitcoin.

Hougan, in an Aug. 27 note to investors, emphasized that Powell’s statement has alleviated some of the uncertainty surrounding Bitcoin.

On Aug. 21, Powell hinted that interest rate cuts are imminent. This message has sparked optimism among investors, who believe lower rates will benefit Bitcoin.

Why Bitcoin will rise

Hougan noted that Powell’s remarks signal the start of a rate-cutting cycle in 2024-2025. According to him, the CME futures now predict a 100% likelihood of a rate cut at the September meeting, with a potential 200 basis point (2%) reduction over the next year.

Historically, such rate cuts have been favorable for risky assets like Bitcoin. Hougan explained that lower rates reduce the discount factor used to calculate long-term asset values, which tends to drive prices higher. Additionally, rate cuts tend to invigorate market sentiment.

As a result, Hougan believes that sidelined investors might now take action, given the clearer market outlook. He stated:

“One of the oldest sayings in investing is ‘Don’t fight the Fed.’ It’s typically used to warn investors against buying stocks and other risky assets when the Fed is raising rates. But the saying works in reverse as well. When rates are coming down, ‘Don’t fight the Fed’ means ‘don’t sit on the sidelines while risky assets go up.'”

Hougan acknowledged that the bull market might not be straightforward due to ongoing uncertainties. These include the upcoming US elections, potential Mt. Gox and US Government Bitcoin sales, and the possibility of Securities and Exchange Commission (SEC) enforcement actions before the fiscal year ends.

Despite these concerns, Hougan believes that Powell’s statement will mark the beginning of a “new era” for BTC.

Osprey funds

Hougan’s bullish prediction followed his firm plans to acquire rival Osprey Bitcoin Trust’s assets.

According to an Aug. 27 statement, Bitwise will acquire OBTC assets for an undisclosed amount. Osprey’s website shows that its trust had over $123 million in assets under management as of August 26.

Under the deal, OBTC unitholders will receive BITB shares in a liquidating distribution. The deal is also designed to be tax-free for OBTC unitholders under US federal income tax laws.

Osprey Funds stated that further details will be provided in a registration statement to be filed with the SEC.

The transaction is expected to close later this year, pending customary closing conditions.

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