As an experienced financial analyst, I have closely followed the Bitcoin market for years and observed its intricate relationship with the Federal Reserve’s interest rate projections. In this case, despite a favorable CPI report, Bitcoin reacted negatively to the hawkish Fed comments regarding future rate hikes.
As a crypto investor, I’ve noticed an uptick in Bitcoin‘s price following the release of favorable US Consumer Price Index (CPI) data, pushing it up to nearly $70,000 on Wednesday. However, my optimism was short-lived as the Federal Reserve announced more hawkish interest rate projections, causing a swift drop in Bitcoin’s value back down to around $67,000.
On Wednesday, June 12, in line with predictions, the US Federal Reserve left its key interest rates unchanged at a range of 5.25% to 5.5%. The Fed, however, signaled a notable shift in monetary policy, suggesting that just one interest rate reduction may occur this year – a marked contrast to the three cuts implemented in March.
The Fed’s unexpected prediction for a rate cut in spite of weaker-than-anticipated Consumer Price Index (CPI) data has unsettled financial markets. In response to this market volatility, 10x Research advises crypto investors to consider investing in risk-averse digital currencies such as Bitcoin, while possibly overlooked assets like Ethereum may be less advantageous for the time being. In a communication to clients on June 13, Markus Thielen, the founder of 10x Research, expressed this perspective.
As a researcher, I’d like to share my findings based on our previous analysis. Our advice remains consistent: it’s best to hold onto winning investments, such as Bitcoin, while being cautious with others, like Ethereum. We’ve observed in the past that lower Consumer Price Index (CPI) numbers tend to boost Bitcoin prices. We anticipate this correlation will persist.
Bitcoin ETF Inflows to Continue
Thielen noted that a decrease in inflation has historically led to substantial investments flowing into Bitcoin spot ETFs. Shortly following the release of the CPI figures on Wednesday, US Bitcoin spot ETFs recorded inflows amounting to $100 million, bouncing back from two consecutive days of outflows earlier in the week.
Thielen pointed out that the pause in ETF investments following Bitcoin’s launch on January 11 was due to unexpectedly high inflation figures in December, dampening expectations of Federal Reserve interest rate reductions. Nevertheless, investments started flowing back in during February, boosting Bitcoin’s price.
In a note by the end of May, Thielen said:
As a crypto investor, I’ve noticed that institutional investments in Bitcoin through ETFs became more frequent towards the end of January. However, it wasn’t until just before the release of the Consumer Price Index (CPI) data on February 13 that this trend began to pick up pace. But when inflation numbers came in at 3.2% on March 12, Bitcoin ETF inflows halted as the market adjusted to the new reality and priced out the expectation of multiple interest rate cuts.
As a researcher, I’ve come across QCP Capital’s prediction of a rate reduction by the Federal Reserve (Fed) in September based on economic indicators. According to their analysis, these indicators signal a cautious approach from the Fed during their upcoming meetings in November and December.
As a researcher at QCP Capital, I’m optimistic about the market outlook due to the anticipated approval of the Ethereum ETF and potential rate adjustments later this year. This positive perspective comes amidst ongoing market uncertainty, highlighting the significant influence Fed decisions will have on economic trends in the future.
Read More
Sorry. No data so far.
2024-06-13 15:57