Bitcoin’s Next Catalyst Could Be Hiding in the US Housing Market

[Die_empty]

It raises the question: Seeing as weak housing market data is potentially bullish for Bitcoin, owing to the potential for the FED to cut rates or ease financial conditions, with lower rates likely to increase liquidity and make risk assets like Bitcoin more attractive, could this play a major role in an imminent rally for BTC?

In a unanimous decision, the Federal Reserve raised interest rates to 3.75%-4% from 3.5%-3.75%. This means your projection that weak demand in the housing market might force the Fed to reduce interest rates was wrong. The US economy is in such bad shape that even against Trump's wishes, rates need to be increased to curb inflation. The Fed is concerned with other important economic challenges, so the housing crisis is not a top priority.

I don't think this is a good take at all.  The fact people can't even afford housing, how are they going to afford to stack BTC?  Common sense says that the worse the economy gets, the harder it is going to be for Bitcoin to rally.  We're seeing housing become a disaster before our eyes.  Layoffs are going to start in October and credit limits are already being tightened in expectation of credit defaults.  Anyone needing to raise cash next quarter is going to be in for a bad time.  I don't see that as being bullish for Bitcoin, but I do see it as being so terrible that it creates a bottom and a buying opportunity in the coming months.

You are right. But OP assumes that the housing market crisis will push for an interest rate cut. And when that happens, people will have more money to buy Bitcoin.

[TedMosby]

I think it does make sense, all you mentioned in post #1. But I think the situation is not as simple as that. A weak housing market alone is not enough to make the FED do a rate cut because there are many other factors like inflation and other macroeconomic factors. For example, a weak housing market + high inflation potentially could make the FED keep the rates or even raise them.

Also, the weakening housing market, especially in recent conditions with the widest gap recorded like you mentioned, could potentially be a signal of a broader financial problem. In that kind of situation, the market could react the opposite way, making Bitcoin bearish because of its nature as a risk on asset that will be avoided in uncertain conditions. CMIIW.

[Lexandroove]

I don't want to dwell in hypothesis because there is no direct correlation between Bitcoin and the housing market of the US. Housing may affect the US policy to a great extent but that is not enough to say that it can catalyze the Bitcoin market directly. If there is anything that should affect Bitcoin, it should be things that has direct relationship with Bitcoin such as cost of energy and laws governing its regulations since Bitcoin mining is energy dependent.

Tbh, Bitcoin doesn’t need a direct causal link to housing for housing data to matter indirectly.

The connection is housing to interest rates/FED policy to liquidity and risk appetite, then to BTC, not housing to BTC directly.

I understand that energy costs and regulation are Bitcoin-specific factors, but Bitcoin has also become a financial asset, so broader macro conditions also matter, with the 2022 tightening cycle being a good example, where the FED raised rates and tightened its balance sheet; financial conditions became significantly tighter, and risk assets, including Bitcoin, were put under pressure.

For sure, I wouldn’t say that weak housing data means Bitcoin will rally. I'd say it is a macroeconomic signal that could matter if it supports expectations of easier monetary policy.

The strength of that signal depends on what the FED does next.

[Lexandroove]

If the housing market cools just enough to bring down shelter inflation, allowing the Fed to gradually lower rates without triggering a recession, then yes, that is bullish. Lower yields push capital further out on the risk curve, and Bitcoin is a prime beneficiary of that fresh money.

However, if this data is the canary in the coal mine for a broader recession, the short-term reality for BTC could be ugly.

Yep, I believe the ordeal here is knowing why the housing market is weakening. A controlled cooling that eases inflation could give the FED room to cut rates without major economic damage, potentially improving liquidity and risk appetite, whereas if housing weakness is part of a broader economic contraction, investors could move toward cash and safer assets first, creating significant pressure on BTC.

The FED’s response and broader economic context remain the main players in this context.

[Leon Zimmer]

In the big picture, Bitcoin is not affected by other markets at all. The only thing that can significantly affect bitcoin is whatever happens to the global economy at a large scale. Like the COVID recession which was global and pushed bitcoin price down significantly.

I don't follow US housing market to know what is going on in it but based on what you described, I don't see anything significant that can affect bitcoin in a meaningful way. If it were some sort of housing crisis (not just a simple "imbalance") it would have been a different story.

As for interest rates, the recent rate rise to 5% on the 10 year treasury notes is a negative sign which is big enough that indicate a worsening recession in the US. The recession side can negatively affect bitcoin but the fact that this is also lowering the faith in the US dollar and the fact that dedollarisation is moving forward faster than even (specially after the recent BRICS meeting) that can be a significantly positive sign.

However, your point on dedollarization is a very important one that needs to be emphasized more often. It is very good point, I would place it on a multi year timeframe, that is, structural erosion of the US$’s dominance as opposed to a short term news cycle related decline in faith in the US$.

Latter may be true but rising treasury yields are usually taken as signs of growth/inflation expectations as opposed to recession, which would send yields south. Now, if yields continue to rise, with 10yr at 5%, on expectations of Fed to keep rates higher for longer that would certainly be bad news in near term for bitcoin/risk assets.

That said, dedollarization (over longer periods) is much better case for bitcoin than housing or single yield print.