Bitcoin (BTC) recently hit its lowest level in two months, dropping below $57,000. This happened after the minutes from the last U.S. Federal Reserve meeting were made public. The minutes confirmed that interest rates would stay the same until economic data shows that a looser policy stance is necessary.
According to a report by Jag Kooner, Head of Derivatives at Bitfinex, the Federal Reserve’s choice to wait and see before committing to interest rate cuts shows a cautious optimism that inflation is on the way down but not yet strong enough to justify immediate rate cuts.
This drop in Bitcoin’s value fits with the link between the economy as a whole that Token Bay Capital founder Lucy Gazmararian talked about last month. Bitcoin lost more than 5% in just 24 hours, showing that higher interest rates hurt the market for risky assets like cryptocurrencies.
Bitcoin Faces Market Uncertainty
After a strong start to the year, Bitcoin has been going back and forth between $56,800 and $70,000 as the Federal Reserve has stuck to its 2% inflation goal. The initial excitement from the acceptance of spot BTC ETFs and the halving has died down. But Kooner thinks that soon-to-be released economic data could give us more accurate information about what will happen in the coming months.
Kooner said that the Non-Farm Payrolls (NFP) report that is due out on Friday could either make people think that interest rates will be cut again or make Bitcoin fall even more.
If people in the market think that the Fed will eventually cut rates because of the ongoing economic confusion, Bitcoin could become more popular as a way to protect against inflation, which could lead to more money flowing into spot BTC ETFs.
Since Bitcoin was cut in half, however, the market hasn’t seen a lot of “dip-buying” or significant trades. James Seyffart of Bloomberg said that there has been a significant stop in U.S. spot BTC ETF action, especially in trading volume.
