Well-known cryptocurrency analyst Benjamin Cowen evaluated the latest U.S. inflation data and its potential macroeconomic impact on Bitcoin (BTC).
The latest U.S. economic data, showing a 0.1% month-over-month decline in the Personal Consumption Expenditures (PCE) price index for June and a limited 0.1% year-over-year rise in the core PCE index, were positively received by the markets. Annual U.S. GDP growth of 1.5% and a low number of weekly initial jobless claims (197,000) demonstrated the resilience of the economy. Following the release of this data, the price of Bitcoin maintained a horizontal and stable trajectory, rather than experiencing a sharp decline.
However, Benjamin Cowen, drawing attention to the unseen aspects of the macroeconomic picture, focused on the internal disagreements in the Fed's interest rate decisions. Although the Fed is keeping current interest rates stable, the fact that three FOMC members voted to raise the interest rate indicates that monetary policy tightening is not yet over. Referring to the relationship between the yield on U.S. two-year Treasury bonds and the Fed's discount rate, Cowen stated that when bond yields exceed the interest rate, the restrictive effect of monetary policy on the market weakens. He added that inflationary pressures could resume if the labor market starts growing again, asserting that there is a high probability of an unexpected Fed interest rate hike in the second half of this year or in September.
The analyst stated that a potential interest rate hike occurring when a cut is expected would be a cold shower for investors and could accelerate a flight from risky assets. Sharing his expectations for Bitcoin's price cycles, Cowen said that the market bottom may not have been reached yet, and judging by historical data, the most likely scenario is that Bitcoin will reach its true bottom in the fourth quarter (Q4) of the year.
*This is not investment advice.
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