The Bitcoin price remains stuck in a downtrend even as investors place bets on Fed interest rate cuts. What gives?
US CPI printed at 3% YoY growth in June, marginally below the 3.1% market consensus. Traders are crying foul because this is supposedly a Bitcoin-bullish CPI print, yet the price remains pinned below $58,000. Three reasons could possibly explain investors’ lack of enthusiasm.
From his perspective, Bitcoin’s weakness can be ascribed to scalp traders and market makers attempting to liquidate leveraged longs. However, the trend favors “continuation higher,” which means BTC should return to $60,000 soon. Basically, when the interest rate is cut by the central bank of any particular country, it reduces incentives for fixed-income investments, and some of this money will seek higher returns elsewhere.
Stocks and gold rallied while Bitcoin price stagnated
For example, Chris Larkin, managing director of trading and investing at E-Trade, told CNBC that the Federal Reserve is “one step closer to a September rate cut,” considering real average hourly earnings for workers slowed 3.9% from the prior year in a Bureau of Labor Statistics report. Slightly up was the labor force participation rate, which climbed to 62.6% in June after resting at 62.5% for May. ‘Slowing wages’ provides strong impetus for Fed cutting rates now. Traders in short-term interest-rate futures on Thursday assigned a 47% probability of two quarter-point hikes by the end of next year, up from 24% a week earlier, according to the CME Group’s FedWatch tracker. On top of this, Yahoo Finance added that the chairman of the Federal Reserve is keenly eyeing the employment rate, and that the central bank “is increasingly aware of the risks posed by a cooling labor market.”
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