Bitcoin (BTCUSD) has significantly outperformed the S&P 500 since the beginning of September, benefiting from a variety of factors including investor optimism around Federal Reserve rate cuts and the upcoming U.S. presidential elections. While bitcoin’s price has surged over 14% during this period, the S&P 500 has only seen a 3% gain, highlighting the cryptocurrency’s appeal amidst macroeconomic uncertainties.
In early September, both Bitcoin and stocks struggled following a disappointing U.S. jobs report that raised concerns about the state of the economy. At the time, bitcoin was trading below $60,000. However, signs from the Federal Reserve about impending rate cuts sparked renewed interest in the digital asset. A major turning point came on September 18 when the Fed announced a 50-basis-point rate cut, signaling more easing to come. This news propelled Bitcoin higher, as lower interest rates tend to reduce Treasury yields, making riskier assets like cryptocurrencies more attractive to investors seeking higher returns.
Despite this momentum, bitcoin remains sensitive to macroeconomic shifts. Any indication that the Federal Reserve might pause its rate-cutting cycle or that a potential recession is on the horizon could quickly reverse bitcoin’s gains. Additionally, there were signs of brief capital outflows from crypto into Chinese equities after China unveiled a stimulus package in late September, but the enthusiasm for that trade soon faded, allowing bitcoin to maintain its upward trajectory.
Further driving bitcoin’s price increase are large inflows into bitcoin exchange-traded funds (ETFs). Data shows that bitcoin ETFs saw inflows of nearly $1.2 billion in just three days, reinforcing the strength of the current rally. Another contributing factor is the U.S. presidential election, where both major candidates have touched on cryptocurrency regulation. While Kamala Harris, the Democratic nominee, mentioned support for a regulatory framework for digital assets, her stance is seen as cautious compared to former President Donald Trump, who has more openly embraced the crypto industry. This slight show of political interest was enough to push Bitcoin up by 5% earlier this week.
Lastly, fears surrounding the market impact of the defunct Mt. Gox exchange have subsided. The exchange, which was involved in a decade-old hack, announced that repayments to affected customers would be delayed until October 2025, easing concerns of a sudden surge of bitcoin supply hitting the market this year. This delay has provided short-term relief to traders, helping bitcoin maintain its rally without the threat of large-scale sell-offs.
With the Fed’s policies, election-related speculation, and reduced fears of oversupply, bitcoin continues to attract investors, making it a volatile but increasingly valuable asset in the current economic climate.
