Macroeconomic uncertainty in the US has pushed Bitcoin to a two-month low, but slowing inflation suggests monetary policy could soon boost risk appetite.
Bitcoin (BTC) price fell below $57,000 after the US Federal Reserve minutes confirmed that interest rates will remain at their current levels until economic data justifies more accommodative policies.
“The Fed’s decision to maintain a wait-and-see approach before committing to cutting interest rates signals cautious optimism that inflation is on a downward trajectory but not sufficiently assured to justify an immediate rate cut,”“ Jag Conner, head of derivatives at Bitfinex, said in a report:
The leading cryptocurrency showed the macro correlation that Token Bay Capital founder Lucy Gazmararian noted last month, with BTC losing more than 5% in 24 hours. Higher interest rates, such as those maintained by the Federal Reserve, typically dampen demand for riskier assets like cryptocurrencies, which likely spurred Thursday’s market activity.
With the central bank Fixed After hitting the 2% inflation target, Bitcoin has been trading between $56,800 and $70,000 after a strong start to the year. The momentum from the approval of a spot Bitcoin ETF and the pre-halving hype has slowed, but Conner expects upcoming data to provide a clearer outlook for the months ahead.
How Tomorrow’s NFP Report Could Impact Bitcoin and BTC ETFs
According to Conner, the expected non-farm payrolls (NFP) report on Friday could increase expectations of future interest rate cuts or lead to further downward pressure on Bitcoin.
If market participants believe that ongoing economic uncertainty will eventually encourage the Federal Reserve to cut interest rates, Bitcoin’s appeal as a hedge against inflation could rise again, directing capital into Bitcoin ETFs, Conner said.
However, “we’ve seen pretty disappointing flows recently and a lack of ‘buy the dip’ since the Bitcoin halving,” Conner said. Bloomberg’s James Seyfart noted that Bitcoin ETF activity in the U.S. has stalled, especially in terms of trading volume.