Bitcoin Surges 5% to $86,800 as Fed Signals Easier Conditions

Bitcoin's price surged past $86,800 on Wednesday, marking a nearly 5% increase as investors responded to signals of looser financial conditions from the Federal Reserve and growing expectations of a liquidity-driven rally. The Federal Reserve announced that it would slow the pace of reducing its balance sheet, capping the runoff of Treasury securities at $5 billion per month, down from $25 billion. This move aims to prevent disruptions in funding markets amid ongoing debt ceiling tensions. Additionally, the central bank left interest rates unchanged in the 4.25% to 4.5% range, maintaining its projection for two rate cuts later this year despite persistent inflation concerns.

Easier financial conditions appear to be fueling risk appetite. The U.S. dollar has posted its third-largest three-day decline since 2015, while Treasury yields and bond market volatility have fallen sharply. Jamie Coutts, Chief Crypto Analyst at Real Vision, said those shifts could set the stage for a significant Bitcoin rally within the next 90 days. “Historically, these signals have often preceded large Bitcoin moves,” Coutts said. “Now, with the People’s Bank of China ramping up liquidity measures, the market may be underestimating how quickly Bitcoin could surge—potentially hitting new all-time highs before Q2 is out—despite ongoing concerns around tariffs and a possible recession,” he added.

The People’s Bank of China has injected additional liquidity into its financial system in recent weeks, reinforcing a global easing trend that could support risk assets. At the same time, the Federal Reserve’s move to slow its quantitative tightening aligns with a broader market narrative that tightening cycles may be nearing an end. Crypto traders have seized on those developments, sending Bitcoin higher alongside gains in equities and tech stocks. Ethereum also climbed, rising to $2,209.

Despite the recent surge, uncertainties remain. Inflation, geopolitical risks, and shifts in fiscal policy could alter the Fed’s trajectory. For now, however, traders are betting that liquidity will remain ample. The current financial landscape has seen a shift towards more relaxed monetary policies, which has had a positive impact on Bitcoin's price. Analysts believe that this trend will continue, with the potential for further rate cuts in the coming months. These cuts are expected to bring the deposit facility rate down to 1.75% by the third quarter of 2025, according to the analyst's forecast. This easing of financial conditions has provided a boost to Bitcoin, as investors seek out higher-yielding assets in a low-interest-rate environment.

Despite the recent surge, some analysts have expressed caution, suggesting that Bitcoin could still face challenges ahead. According to the analyst's forecast, there is a possibility of a bear market indicator that suggests a crash to $40,000 is imminent. However, others believe that Bitcoin is currently in a bear trap and that a bull run will begin after the current phase ends. This divergence in opinions highlights the uncertainty surrounding Bitcoin's future price movements. The impact of Bitcoin on financial inclusion and stability has also been a topic of discussion. While some regions have seen minimal impact on financial inclusion, there are concerns about the high risks to financial integrity and stability, as well as fiscal sustainability. These concerns have led to calls for greater regulation and oversight of the cryptocurrency market.