Uncertainty in the U.S. macroeconomic landscape recently pushed Bitcoin to a low not seen in two months, though signs of easing inflation suggest that monetary policy might soon bolster risk appetite.
Bitcoin (BTC) slipped below the $57,000 mark following announcements from the U.S. Federal Reserve’s latest meeting, where it was decided that current interest rates would persist until economic data supports looser monetary policies. “The Fed’s choice to adopt a wait-and-see stance before committing to interest rate cuts reflects cautious optimism regarding the trajectory of inflation, yet remains hesitant to immediately reduce rates,” observed Jag Kooner, Head of Derivatives at Bitfinex.
This move highlighted the close correlation with broader macroeconomic trends as noted by Token Bay Capital’s founder, Lucy Gazmararian, last month, as BTC experienced a decline of more than 5% within a 24-hour span. Historically, higher interest rates akin to those maintained by the Fed tend to dampen demand for riskier assets like cryptocurrencies, likely contributing to the market downturn on Thursday.
Maintaining focus on its 2% inflation target, the Fed’s stance has kept BTC trading between $56,800 and $70,000 after a robust start to the year. While initial momentum from the approval of spot BTC ETFs and anticipation surrounding the halving event has waned, Kooner anticipated that forthcoming data could provide greater clarity for the months ahead.
Additional considerations include the impact of the upcoming Non-Farm Payrolls (NFP) report, expected on Friday, which could heighten expectations for future rate cuts or exacerbate downward pressure on Bitcoin, according to Kooner. If market participants anticipate that ongoing economic uncertainties will eventually prompt the Fed to lower rates, Bitcoin’s attractiveness as an inflation hedge could revive, potentially channeling capital into spot BTC ETFs.
Nonetheless, Kooner cautioned, “We’ve observed notably subdued flows and a dearth of ‘dip-buying’ since the Bitcoin halving.” Bloomberg’s James Seyffart echoed these sentiments, noting a stagnation in U.S. spot BTC ETF activity, particularly in terms of trading volumes.
For further insights:
Core Scientific’s founder asserts Bitcoin remains significantly undervalued