Bitcoin prices have tapped $117,000 twice over the past couple of hours as the asset reached its highest level since August 23, almost four weeks ago.

BTC gained 1.5% on the day, and almost 5% on the week, but had retreated slightly to $116,600 at the time of writing on Wednesday morning in Asia.

The move comes on the day that the US Federal Reserve is expected to lower interest rates for the first time this year. This will lead to greater liquidity and a potential cycle of monetary easing, which has been historically bullish for riskier assets such as crypto.

Crypto Analysts Weigh In

Economist Alex Krüger said he was ready for the dovish cut despite markets already pricing the move in.

“Though my market views have not changed much. Im bullish on equities and Bitcoin. The market often forgets how much BTC can move due to recency bias.”

Rate cuts also result in liquidity flow from less-risky assets like treasury bills to high-risk assets like stocks and crypto, observed ‘Ash Crypto.’

“As more cuts happen, liquidity flows into Bitcoin, and altcoins will increase,” he said before adding:

“We already have major catalysts like ETF approval, pro-crypto administration and regulatory clarity. Once liquidity starts to flow, these catalysts will be priced in, leading to a parabolic Q4 rally.”

The last time the FED cut rates the market pumped very hard.

So I honestly do not understand why so many people are bearish about rate cuts?

We are quite literally, almost to the day, in the exact same position we were last time the FED cut rates.

IF we had been mega pumping… pic.twitter.com/OWVDcwgnZY

Meanwhile, BitMEX co-founder Arthur Hayes spoke about the Fed’s “third mandate,” which is now being discussed.  Advocacy for yield curve control (YCC) signals a potential shift in monetary policy, which is good for Bitcoin, he alluded.

Weakening the Greenback

Excess liquidity also tends to weaken the US dollar as more dollars chase fewer goods and assets. Bitcoin, often viewed as a digital gold or hedge against inflation, historically benefits from a weaker dollar.

The dollar index (DXY), which measures USD against a basket of currencies, has already weakened 12% so far this year.

Speaking on CNBC on Monday, Fundstrat’s Tom Lee said the Fed “can actually reinject confidence by saying we’re back into an easing cycle,” before adding that a rate cut will be a “real improvement in liquidity.”

He predicted that Bitcoin and Ethereum would make a “monster move” in the last three months of this year.