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Bitcoin (BTC) fell as low as $59,500 on Binance ahead of tomorrow’s Federal Open Market Committee (FOMC) meeting. Market participants are bracing for a hawkish stance from the Federal Reserve (Fed), with expectations of unchanged interest rates.
The CME FedWatch tool indicates that only 4.4% of economists expect a rate cut – the first in more than a decade – while a majority of 95.6% expect rates to remain between 525 and 550 points basic.
According to the Kobeissi Letter, current market data indicates a 36% probability that there will be no interest rate cut this year. Four months ago, the chance of maintaining current rates was only about 3%.
Expectations have also shifted to just one reduction this year. Previously, the market expected six rate cuts. Additionally, the probability of experiencing two or more rate cuts decreased to 31%.
You can’t make this up:
Forecast markets now show a 36% chance of ZERO interest rate cuts in 2024, according to @Kalshi.
To put this into perspective, 4 months ago there was about a 3% chance that there would be no rate cut in 2024.
The base case scenario has gone from 6 rate cuts to 1 rate cut this year.… pic.twitter.com/mTQMDAz99K
– Kobeissi Letter (@KobeissiLetter) April 25, 2024
Risk of stagflation
In this financial climate, the United States faces stagflation risks as inflation persists and economic growth slows.
In the first quarter of 2024, GDP growth slowed to 1.6%, below the 2.2% forecast and down from 3.4% in the previous quarter. Meanwhile, the US Core PCE inflation index rose from 2.0% to 3.7%.
Fed Chairman Jerome Powell said recent data does not make the Fed more confident, suggesting a longer time frame to return to economic stability. He expressed confidence in the adequacy of current policies to address current risks, referring to high and sustainable interest rates without increases.
Bitcoin’s trajectory has reflected these economic uncertainties, falling below $62,000 earlier in the week on renewed stagflation concerns.
A brief rally above $64,000 occurred yesterday with the launch of Bitcoin and Ethereum spot ETFs in Hong Kong, but the momentum was short-lived as investor caution set in ahead of the decision Fed key.
One-time Bitcoin ETF inflows slowing
The market also saw a notable slowdown in one-time Bitcoin ETF inflows, with BlackRock’s iShares Bitcoin Trust (IBIT) suspending new inflows for several days, a first since its debut. Meanwhile, other funds saw continued outflows, including Grayscale Investments.
Bitcoin price has remained stable since the fourth halving event. According to data from CoinGecko, Bitcoin is currently trading at around $60,100, down more than 6% in the last 24 hours, and will likely end its streak of continuous growth, which has lasted since last September.
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