- Market analysts provide a range of opinions on how the Federal Reserve’s economic stance will affect Bitcoin and other cryptocurrencies.
- Following the Fed’s decision, Bitcoin’s price fell to $67,000 and risks further declines.
- Financial experts express differing views on the Fed’s monetary policy and its influence on risk assets like Bitcoin.
Explore how the Federal Reserve’s recent decision could impact Bitcoin and the broader cryptocurrency market.
The Fed’s Decision: Analyzing Bitcoin’s Macro Risks
Bitcoin struggled to maintain a price above $67,000 following the Federal Reserve’s decision to keep interest rates steady at 5.25% to 5.5% for the seventh time. The Fed’s economic projections and forward guidance have triggered mixed views on its impact on Bitcoin and other risk assets. According to a commentary by JPMorgan, the Fed’s monetary outlook remains uncertain, with only one rate cut expected by the end of 2024, contrasting with the three cuts predicted in March.
Mixed Signals from Market Experts
The uncertainty was further amplified by statements from Federal Reserve Chair Jerome Powell, who expressed skepticism about recent inflation data, saying, “It is probably going to take longer to get the confidence that we need to loosen policy.” Quinn Thompson, founder and CIO of Lekker Capital, viewed the Fed’s outlook as a risk to crypto assets, citing a potential liquidity crunch similar to what happened before the US tax season in April. “I believe the ‘liquidity air pocket’ that began at the end of Q1 prior to tax season is still with us until there is either another month or so of better inflation data to reinforce the current disinflationary trend,” Thompson stated.
Bearish Outlook for Altcoins
Expanding on this, Thompson mentioned the potential for a significant downturn in the altcoin market, anticipating that most altcoins could suffer further losses. “I think there is serious cascade risk in crypto, and in particular, expect most altcoins to be taken out back. The market seems to have lost any ability to bounce,” he mentioned. Additionally, he pointed out Bitcoin’s failure to break above its all-time high as a weakness for the cryptocurrency.
Bullish Sentiment from Other Analysts
On the other hand, some analysts remain optimistic. Crypto trading firm QCP Capital acknowledged the Fed’s ambiguous stance but maintained a bullish outlook for the rest of 2024. In a recent update, QCP Capital noted, “We maintain a structurally bullish outlook for the remainder of the year, driven by the anticipated ETH ETF S-1 approval and potential rate cuts in September and at the year-end.” As of the latest data, the likelihood of a rate cut in September stood at over 60%, compared to a 30% chance of maintaining the current rates.
Short-term Price Predictions
Another macro analyst, TedTalksMacro, shared a positive outlook, noting that the May US CPI print appeared disinflationary and was short-term bullish for cryptocurrencies. Meanwhile, daily liquidation charts indicated substantial liquidity clusters at $66,000 and $68,000, suggesting a possible retest of these levels in the near future.
Conclusion
In conclusion, the market is showing mixed signals regarding the Fed’s decision and its impact on Bitcoin and other cryptocurrencies. While some experts warn of a potential downturn, others remain optimistic, forecasting a bullish trend for the latter part of 2024. Investors should closely monitor these developments to make informed decisions in this volatile market.
