Bitcoin is on course for one of its biggest September gains ever, courtesy of a global wave of interest rate cuts headlined by an aggressive pivot to looser monetary policy in the US.

The largest digital asset is up over 10% this month, contrasting with an average 5.9% decline in September during the past decade. An index of smaller tokens has climbed more than 20%, a sign of looser financial conditions enlivening riskier segments of the crypto market.

The US Federal Reserve, the European Central Bank and the People’s Bank of China all lowered borrowing costs in September to support economic growth. Investors responded to more accommodative monetary conditions by bidding up everything from stocks to gold, anticipating further stimulus ahead.

“Bitcoin’s correlation with monetary policy continues to be highest with respect to the Fed,” said Sean McNulty, director of trading at liquidity provider Arbelos Markets. “Other central banks easing certainly helps, too.”

The cryptocurrency rose as much as 1.2% on Friday, changing hands at US$65 385 as of 12.18pm in Singapore. It’s up 56% in 2024, helped by inflows into US bitcoin exchange-traded funds, but off the record of $73 798 hit in March.

The $65 000 level may prove “sticky” for a few hours due to the expiry of a large number of options contracts on Friday, said Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for trading in digital-asset derivatives.

US election

A failure to break above $65 000 “decisively” could presage a weaker period for the token, according to a note from crypto exchange Kraken.

Aside from monetary policy, the digital-asset industry is awaiting the resolution of the US presidential election race. Many executives expect a lift to sentiment from clearer American crypto regulations in the months after the vote. — Suvashree Ghosh and Sidhartha Shukla, (c) 2024 Bloomberg LP