This week, cryptocurrency markets staged a long-awaited recovery, following four consecutive weeks of downside momentum.
Bitcoin’s (BTC) price reclaimed the $90,000 psychological mark on Wednesday, bringing some much-needed relief for Bitcoin exchange-traded fund (ETF) holders, who were once again back in profit as BTC traded above the key $89,600 flow-weighted cost basis of ETF buyers.
Bolstering investor sentiment, Cathie Wood, the CEO and chief investment officer of ARK Invest, said the company’s $1.5 million Bitcoin bull market price prediction remained unchanged, pointing to billions in returning liquidity following the end of the US government shutdown.
The crypto market recovery followed a sharp increase in expectations of interest rate cuts in the US, with odds rising by 46% in a week. Markets are pricing in an 85% chance of a 25 basis point interest rate cut at the US Federal Reserve’s Dec. 10 meeting, up from 39% a week before, according to the CME Group’s FedWatch tool.
However, Bitcoin is still facing the worst November in seven years, as the world’s first cryptocurrency is down about 17% on the monthly chart, despite the month averaging 41% historic Bitcoin returns, according to blockchain data provider CoinGlass.
Cathie Wood says ARK’s $1.5 million Bitcoin bull price hasn’t changed as markets eye rally
Equities and cryptocurrency markets may be setting up for a year-end reversal as liquidity improves and US monetary policy turns more supportive following the end of the record government shutdown.
Improving market conditions will be driven by the increasing liquidity, which has already returned $70 billion into markets since the end of the US government shutdown, with another $300 billion expected to return over the next five to six weeks as the Treasury General Account normalizes, according to investment management company ARK Invest.
Another potential catalyst will arrive on Dec. 1, when the US Federal Reserve is scheduled to end its quantitative tightening program and pivot toward quantitative easing, a shift that involves bond-buying to lower borrowing costs and stimulate economic activity.
“With liquidity returning, quantitative tightening (QT) ending December 1st, and monetary policy turning supportive, we believe conditions are building for markets to potentially reverse recent drawdowns,” wrote Ark in a Wednesday X post.
Crypto and AI liquidity squeeze may ease
The current “liquidity squeeze” limiting the upside of the cryptocurrency and artificial intelligence markets is set to “reverse in the next few weeks,” wrote Cathie Wood, the CEO and chief investment officer of ARK Invest, in a Thursday X post.
Earlier in April, ARK Invest predicted a 2030 Bitcoin (BTC) price target of $1.5 million in the company’s “bull case,” and a $300,000 price target in the “bear case.”
Despite the recent crypto market correction and stablecoins subtracting from Bitcoin’s role as a safe-haven asset, the bullish price target remains unchanged.
“The stablecoins have accelerated, taking some of the role away from Bitcoin that we expected,” but the “gold price appreciation has been far greater than we expected,” explained Wood during a webinar on Monday, adding:
“So net, our bull price, which most people focus on, really hasn’t changed.”
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UK takes “meaningful step forward” with proposed DeFi tax overhaul
The UK has floated a new tax framework that eases the burden on decentralized finance (DeFi) users, with deferred capital gains taxes on crypto lending and liquidity pool users until the underlying token is sold, which the local industry has welcomed.
HM Revenue and Customs (HMRC) proposed on Wednesday a “no gain, no loss” approach to DeFi that would cover lending out a token and receiving the same type back, borrowing arrangements and moving tokens into a liquidity pool.
Taxable gains or losses would be calculated when liquidity tokens are redeemed, based on the number of tokens a user receives back compared to the number they originally contributed, according to the proposal.
Currently, when a user deposits funds into a protocol, regardless of the reason, the move may be subject to capital gains tax. In the UK, capital gains tax rates can vary from 18% and 32%, depending on the action.
Tax framework a “positive signal” for UK crypto regulation
Sian Morton, marketing lead at the crosschain payments system Relay protocol, said HMRC’s no gain, no loss approach is a “meaningful step forward for UK DeFi users who borrow stablecoins against their crypto collateral, and moves tax treatment closer to the actual economic reality of these interactions.”
“A positive signal for the UK’s evolving stance on crypto…
cointelegraph.com