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Stick with Bitcoin, 10x research says after Fed forecasts only one rate cut for 2024
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BTC tends to bounce back after weaker-than-expected CPI releases, 10x said.
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The Fed will eventually signal further rate cuts, the research firm added.
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ETF inflows resumed on Wednesday as U.S. inflation came in lower than expected.
10x Research continues to support bitcoin even as the leading cryptocurrency trades under pressure due to the Fed’s hawkish interest rate projections.
On Wednesday, the US central bank left its benchmark borrowing cost unchanged in the range of 5.25% to 5.5%, as expected. However, it expected only one rate cut this year, compared to three in March. Given the weaker-than-expected CPI release earlier in the day, the Fed’s new rate forecast likely spooked markets, sending bitcoin lower.
The top cryptocurrency by market value has recovered to $67,400 since the Fed released rate projections, reversing the post-CPI jump to $70,000. Show CoinDesk data.
Still, 10x Research maintains a positive outlook on bitcoin, expressing confidence that the rally will resume soon.
“Our recommendation remains unchanged: stick with the winners (Bitcoin) and avoid others (like Ethereum). Our previous analysis has shown that a lower CPI number tends to push Bitcoin prices higher, and we expect this trend to continue,” Markus Thielen, founder of 10x Research, said in a note to clients on Thursday.
The U.S. consumer price inflation rate remained flat in May, missing the consensus estimate of a 0.1% increase and down from 0.3% in April. The year-over-year rate was 3.3%, in line with estimates and down from 3.4% in April.
Bitcoin price trend tends to change direction based on US CPI data. (10x)
According to Thielen, slowing inflation has historically attracted huge inflows to U.S.-listed bitcoin exchange-traded funds. Provisional data from Distant investors show that ETFs accumulated $100 million on Wednesday, breaking a two-day streak of outflows.
Thielen explained that ETF flows dried up after the Jan. 11 debut, when December CPI rose, weakening the case for Fed rate cuts. Flows resumed in February, pushing bitcoin higher .
“ETF flows turned positive in late January, but began to accelerate only slightly before the release of the consumer price index data on February 13. But when inflation rose again to 3.2% the March 12, Bitcoin ETF inflows stopped as the market priced in the narrative of 2-3 rate cuts,” Thielen noted in late May.
Thielen expects the Fed to signal further rate cuts later this year as inflation has already peaked.