USD Interest Rates Lift BTC Forwards Market

The most important element in any forecast on the forward value of a currency pair is the interest rate differential between the two currencies. Bitcoin to date does not have a reliable interest rate market. Lending out your Bitcoin is a fools errand. The internet is filled with stories of defaults on peer to peer Bitcoin lending platforms. However, where unsecured USD lending is concerned it’s a different matter.

The most popular unsecured lending market for USD which is then used as leverage to buy Bitcoin is on Bitfinex. Traders can deposit their idle USDs and earn a generous return on them. Currently traders can receive 0.30% per day on their USD, that’s 108% per year!

The rate at which traders are willing to borrow USD to speculate on the future price of Bitcoin goes hand in hand with the market movement. The Bitcoin price has shot up over $200 in the last two weeks and interest rates have spiked as well. Given the current interest rate regime a one year forward on the price of Bitcoin should be trading over $1,200. If you want to peer into the future, consider that crystal ball.