- The Consumer Price Index reading on June 13 was below expectations, but Bitcoin and altcoins failed to recover.
- XRP falls 8%, wiping out price gains from the ‘Hinman Emails’ in the Ripple lawsuit.
- The headline CPI prints at +4.0% YoY, bringing the 3-month annualized rate to +2.21%.
- After 10 consecutive rate hikes, the Federal Reserve said it intends to keep interest rates unchanged but may raise them twice this year to curb inflation.
- The Fed is still committed to 2% inflation.
- Rate hikes are typically unfavorable for Bitcoin, Ethereum, and other alt cryptocurrencies.
U.S. equities closed mixed on Wednesday as the Federal Reserve kept interest rates steady but indicated in new economic estimates that borrowing costs will likely rise by another half-percentage point by year’s end. After the rate-setting Federal Open Market Committee (FOMC) responded to a better economy and slower inflation, trading was volatile and volume was high. The Fed’s interest rate decision became more hawkish as policymakers at the median expected the benchmark overnight interest rate to rise from 5.00%-5.25% to 5.50%-5.75% by year’s end. Nvidia’s 185% surge has been the US stock market’s highlight this year. As investors bet the chipmaker will gain from the AI boom, it outperformed all other S&P 500 stocks.
The bearish thesis is still in play due to inflation expectations of 2%. The important core PCE inflation measure is expected to be between 3.9% and 4% by the end of the year, which is a higher range than before. Sticky inflation means that the Fed will be more hawkish and that cryptocurrencies will continue to face problems as regulatory fights heat up in the autumn. The Fed decided against raising rates but indicated that there would be two more in the future. It is continuing to hold the belief that inflation is above target and needs additional attention in order to keep the market under control.
Bitcoin Fear and Greed Index:
On June 13 and June 14, the BTC Fear and Greed Index, a gauge of the general attitude towards bitcoin, fell into “Fear” zone. The measure last experienced two days in that region on consecutive days during the first half of March.
The US SEC’s tsunami on the cryptocurrency market after launching litigation against Binance and Coinbase may be one factor in the trend’s shift. Last Monday, Bitcoin was trading at well over $25,000, but the following week saw some extremely erratic trading days and multi-month lows.
The US SEC’s legal battle with Binance and Coinbase has had an impact on the whole cryptocurrency industry, particularly the many altcoins it alleged to be unregistered securities. However, the regulator’s efforts also hurt the price of BTC, which dropped from $27,000 to a multi-month low of under $25,000 after the two lawsuits were revealed.
Bitcoin Price Analysis:
Bitcoin attempted to ascend near the psychological barrier of $27,000, but the substantial wick on the candlestick indicates that bears sold at higher levels. For the past few days, the price was trapped between $27,000 and the support of $26,300. The absence of interest in buying at $27,000 indicated that bears had the upper hand and that selling pressure was increasing. Buyers will need to break through this psychological level at $27,000 in order to form a short-term bullish bias. Until then, the BTC/USDT may first fall to the $24,719 support level, then to the $23,500 level, with modest bounces in between.
Markets are currently pricing in a 70% possibility of a 0.25% interest rate hike in July.
Concluding Thoughts:
The Federal Reserve’s decision to cease hiking interest rates may not have surprised anyone, but it will be more difficult to forecast how it will affect the markets. Risk-on trading periods, which are frequently triggered by the Fed halting or ending a rate hike cycle, have historically seen Bitcoin outperform other asset classes. The Fed also hinted that it might keep raising interest rates in the future. Bitcoin’s usage as a store of value rather than a risk-on asset is, however, fundamentally justified by its scarcity. Bitcoin’s performance in the wake of rising inflation has been average, but on par with traditional inflation-hedged store-of-value assets like gold and silver. The Fed is still committed to 2% inflation.
The development has sent markets into a tailspin, and the full direction won’t emerge until Federal Reserve Chair Jerome Powell says that rate hikes will be stopped rather than put on hold. In the coming days, Bitcoin and the altcoins will give us a clearer idea of their short-term path. The relationship between BTC and stocks is interesting to watch. Since a few weeks ago, the asset classes have been inextricably correlated. Whatever happens as a result of the Fed’s tardiness, there is a bull case for Bitcoin during the 2024 halving event.
