In recent times, monetary decisions made by the US Federal Reserve have engendered considerable interest across both financial and crypto markets. This interest has been intensified by the Bitcoin (BTC) price keeping meek in the mid-$29,000s, following a period of sustained US inflation.
A crucial aspect of concern among Bitcoin enthusiasts and investors alike is the US inflation and interest rates scenario. The Core Consumer Price Index (CPI) rose only 0.2% MoM in July, which was according to predictions and unchanged from June. The YoY metric fluctuated slightly lower than the expected 4.8% at 4.7%.
While there was a robust and lasting surge in US inflation starting from mid-2021, skeptics reasonably questioned the track of the US Federal Reserve. Their concerns surfaced as the central monetary authority began an unprecedented interest-rate hiking cycle in early 2022. In the 17 months since then, it has raised interest rates by 525 bps. This historic move reached a 22-year peak at 5.25-5.50% in July, intriguing market watchers and participants.
However, there is a growing sentiment that the Federal Reserve may turn the tide toward rate cuts, as Core CPI data suggests an encouraging relief from price pressures in the US economy. This change could bode well for Bitcoin, with the prospect of interest rate hikes becoming less probable. A reduced pressure scenario should be conducive to more stable Bitcoin prices, considering this cryptocurrency has historically favored lower interest-rate environments.
The notion that the Federal Reserve’s interest rate hiking cycle has likely paused, with potential rate cuts in sight, might serve as a substantial macro impetus for Bitcoin. This trend may hark back to the 2020/2021 bull market, which was majorly driven by interest rates being held near to zero by the Federal Reserve in response to the pandemic.
Adding to this is the hype surrounding recent spot Bitcoin ETF applications from heavyweights like BlackRock. Crypto billionaires such as Galaxy Digital CEO, Mike Novogratz, leads the anticipation that a spot Bitcoin ETF application approval is forthcoming. This may cement the base of both short and medium-term predictions for Bitcoin prices remaining bullish.
Yet, it’s essential to remember that while the interest rate cuts and Bitcoin’s potential ETF approvals might sound enticing, they are not likely to materialize before early 2024. However, it’s noteworthy that global adoption appears to be trending favorably overall, with primary markets in Europe (like the UK and EU) enacting predominantly pro-crypto legislation, and China trailing behind in making crypto legal once again in Hong Kong.
Source: Cryptonews
