Bitcoin Breaks Below $60,000 Despite Rising Fed Rate Cut Expectations, Is Crypto Confidence Waning?The latest data from the U.S
Bitcoin Breaks Below $60,000 Despite Rising Fed Rate Cut Expectations, Is Crypto Confidence Waning?
The latest data from the U.S. Department of Labor showed that the annual growth rate of the Consumer Price Index (CPI) in July was 2.9%, the lowest since 2021 and slightly lower than the market expectation of 3.0%. This data further confirms the trend of slowing inflation and has increased market expectations for the Fed to cut rates in September. However, despite the rising expectations of rate cuts, Bitcoin prices fell sharply after the CPI data release, breaking below the $60,000 mark and recording a daily decline of 4.12%. This has raised concerns about waning confidence in the cryptocurrency market.
The chief investment strategist at Charles Schwab said that although the inflation index is declining, it remains sticky and future inflation and employment data should be closely monitored. CME Group's FedWatch data shows that the market expects a 64.5% chance of a 25 basis point rate cut in September and a 35.5% chance of a 50 basis point cut. However, Juan Leon, head of investment strategy at crypto asset management firm Bitwise, believes that the Fed will place more emphasis on the "core CPI" in its decision-making, which still remains around 3%, suggesting that the Fed may not be ready for a significant rate cut.
Investors generally believe that if the Fed begins to cut rates, it will help boost prices for risk assets such as Bitcoin. However, the narrative surrounding the cryptocurrency market currently remains weak, and investors are expecting more positive news, especially the upcoming interest rate decision (FOMC) results and the Jackson Hole annual meeting, where Fed Chair Powell's remarks will be closely watched.
Analyst Marcel Pechman pointed out that Bitcoin's drop below $60,000 is mainly related to concerns about a potential U.S. economic recession. He said that while the market was previously optimistic about the positive developments surrounding Bitcoin ETFs and increased institutional holdings, these positive developments failed to offset the impact of the global economic slowdown. As global economic growth slows, the appeal of risk assets is declining. Especially after the Bank of Japan raised interest rates, market risk appetite has further decreased, putting greater downward pressure on assets like Bitcoin.
On the other hand, there are those who argue that Bitcoin could become an important "safe-haven asset." While Bitcoin is currently performing poorly, a potential economic recession and slowing inflation in the future could provide new opportunities for its performance next year. While it is currently difficult to assess the likelihood of such a scenario, investors are already preparing for potential market fluctuations.
From a technical analysis perspective, Rakesh Upadhyay, senior analyst at cryptocurrency media outlet Cointelegraph, pointed out that $55,724 would be a key support level on the daily chart. If Bitcoin tests this support in the future, it could attract significant buying from bulls and challenge the 20-day (60,803) and 50-day (61,712) moving average resistance. Conversely, if Bitcoin falls below $55,724, it could experience a deeper pullback and further test the previous low near $49,000.
Overall, while the Fed's rate cut expectations are rising, the stickiness of inflation and concerns about a global economic slowdown remain, creating uncertainty for the cryptocurrency market. The price of Bitcoin will depend on future inflation data, employment data, and the direction of the Fed's monetary policy, and investors need to closely monitor relevant information and be prepared for market fluctuations.
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