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Renowned cryptocurrency analyst Benjamin Cowen assessed the latest inflation data from the US and its potential macroeconomic impact on Bitcoin (BTC).
The latest data on the US economy, showing a 0.1% month-on-month decrease in the June PCE Price Index and a limited 0.1% year-on-year increase in core PCE, was positively received by the markets. The 1.5% annual growth in US GDP and the low weekly jobless claims figure of 197,000 demonstrated the economy’s resilience. Following the release of these figures, the Bitcoin price maintained a horizontal and resilient trajectory instead of experiencing a rapid decline.
However, Benjamin Cowen, drawing attention to the unseen aspects of the macroeconomic picture, focused on the internal divergences in the Fed’s interest rate decisions. Despite the Fed keeping current interest rates stable, the fact that three members of the FOMC voted for an interest rate increase indicates that monetary tightening is not yet over. Referring to the relationship between 2-year US Treasury yields and the Fed’s policy rate, Cowen stated that when bond yields rise above the interest rate, the restrictive effect of monetary policy on the market weakens. He added that inflationary pressures could re-emerge if the labor market heats up again, arguing that there is a high probability of a surprise interest rate hike by the Fed in the second half of this year or in September.
The analyst stated that a potential interest rate hike, coming at a time when interest rate cuts are expected, would be a cold shower for investors and could accelerate the flight from risky assets. Sharing his expectations regarding Bitcoin’s price cycles, Cowen said that the market bottom may not yet have been reached and, looking at historical patterns, the most likely scenario is that Bitcoin will find its true bottom in the fourth quarter (Q4) of the year.
*This is not investment advice.