Key Points
- Bitcoin price briefly hit $70,000 amid US CPI data and Federal Reserve’s hawkish interest rate projections.
- 10x Research suggests crypto investors should favor Bitcoin over Ethereum due to market uncertainties.
Despite positive US CPI data, Bitcoin’s price briefly surged to $70,000 on Wednesday, only to drop back to $67,000 following hawkish interest rate projections from the Federal Reserve.
On the same day, the US central bank maintained the benchmark interest rates at 5.25%- 5.5%, in line with market expectations. However, the Fed hinted at only one rate cut this year, a significant drop from the three rate cuts projected in March.
Market Response to Fed’s Rate Cut Prediction
The Fed’s new rate cut prediction, despite the softer-than-expected CPI data, has rattled markets. Consequently, 10x Research advised that crypto investors would be better off investing in safe-haven assets like Bitcoin while avoiding other assets like Ethereum. Markus Thielen, founder of 10x Research, stated in a note to clients:
“Our recommendation remains unchanged: to stick with the winners (Bitcoin) and avoid others (such as Ethereum). Our previous analysis has shown that a lower CPI number tends to lift Bitcoin prices, and we anticipate this trend will continue.”
Bitcoin ETF Inflows Expected to Continue
Thielen suggested that a slowdown in inflation typically results in robust inflows into spot Bitcoin ETFs. After the CPI numbers were released on Wednesday, US spot Bitcoin ETFs saw inflows of $100 million, following two consecutive days of outflows.
He noted that ETF inflows stopped after the January 11 debut due to a higher-than-expected December CPI, which undermined the argument for Fed rate cuts. However, inflows resumed in February, driving Bitcoin’s price higher.
Meanwhile, QCP Capital predicts a rate reduction in September, citing economic indicators that suggest a cautious approach from the Fed in subsequent meetings scheduled for November and December. The firm’s outlook remains bullish, fueled by expectations surrounding the approval of the ETH ETF S-1 and potential rate adjustments later in the year. This forecast highlights ongoing market uncertainties and the critical role of Fed decisions in shaping economic trends moving forward.
