Thomas Daniels
U.S. macroeconomic uncertainty has driven Bitcoin to a two-month low, but cooling inflation suggests that monetary policy may soon bolster the risk appetite.
Bitcoin’s (BTC) dip below $57,000 followed the release of minutes from the U.S. Federal Reserve meeting, which confirmed the continuation of current interest rates until economic data justifies looser policies.
“The Fed’s decision to maintain a wait-and-see approach before committing to interest rate cuts signals cautious optimism that inflation is on a downward trajectory but not sufficiently assured to justify immediate rate reductions,” stated Jag Kooner, Head of Derivatives at Bitfinex, in a report.
The leading cryptocurrency exhibited the macro correlation mentioned by Token Bay Capital founder Lucy Gazmararian last month, as BTC shed over 5% in 24 hours. Higher interest rates, like those maintained by the Fed, typically counteract demand for risk assets such as cryptocurrencies, which likely influenced Thursday’s market activity.
With the central bank fixed on its 2% inflation target, BTC has traded between $56,800 and $70,000 after a strong start to the year. Momentum from spot BTC ETF approval and pre-halving hype has cooled, but Kooner predicts that upcoming data may provide a clearer outlook for the coming months.
How Tomorrow’s NFP Report Could Impact Bitcoin and BTC ETFs
According to Kooner, the Non-Farm Payrolls (NFP) report expected on Friday could increase expectations for future rate cuts or apply further downward pressure on Bitcoin.
If market participants believe that ongoing economic uncertainty will eventually encourage the Fed to cut rates, Kooner suggests Bitcoin’s appeal as an inflation hedge could rise again, directing capital into spot BTC ETFs.
However, Kooner noted, “we’ve recently seen quite underwhelming flows and a lack of ‘dip-buying’ since the Bitcoin halving.” Bloomberg’s James Seyffart also observed that U.S. spot BTC ETF activity has stalled, especially in terms of trading volume.
