Bitcoin may face a rocky start this month as traders look to forecast US economic activity amid a climate of persistent inflation and a rising stock market supported by major technology companies.
U.S. real GDP rose at an annual rate of 1.4% in the first quarter of 2024, according to Third estimate Issued by the Bureau of Economic Analysis.
Thursday’s figures contrast sharply with results from the fourth quarter of last year, which showed U.S. economic activity rose 3.4%.
The bureau’s data also showed that the personal consumption expenditure index in May, a leading indicator of inflation, fell to 2.6% year-on-year, down from 2.7% in April.
“This slowdown indicates a potential economic slowdown,” said Jag Conner, head of derivatives at Bitfinex. Decryption“Looking ahead to July, market participants should expect volatility to return, with further regulatory developments and macroeconomic policies set to play a crucial role.”
In cryptocurrencies, this could lead to increased interest in Bitcoin and other digital assets as alternative investments if traditional markets show signs of weakness, Conner added.
A slowing economy could also prompt the U.S. Federal Reserve to begin cutting interest rates this year. The Fed has kept interest rates high in an effort to manage price stability and prevent economic overheating.
Cheaper borrowing at lower interest rates could flow into risky assets, including bitcoin, analysts say.
“Historical trends suggest that during periods of economic downturn, investors often turn to Bitcoin as a store of value,” Conner said.
More evidence on Fed policy is expected to emerge at the next Federal Open Market Committee meeting scheduled for July 30-31. Meanwhile, futures traders are pricing Lowering the interest rate twiceIt is expected to launch sometime in the last quarter of this year.
While some expect increased volatility in July, others remain skeptical.
“July will be a period of consolidation and low volatility,” said Pratik Kala, head of research at cryptocurrency fund manager DigitalX. Decrypt. “Bitcoin is looking for the next major catalyst to go higher. There is none “On the horizon, but this is expected to change as we approach the US elections.”
Seasonality is also important. Kalla added that the third quarter is considered a period of low volatility as most key decision makers in the United States are usually on vacation.
The world’s largest cryptocurrency jumped to its highest point in a week late Sunday evening, near $63,700, CoinGecko reported. Data Bitcoin is down 14% from its all-time high of $73,800 last March.
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