10x Research advises investors to continue investing in Bitcoin, even though the cryptocurrency faces pressure following the Federal Reserve’s recent interest rate projections. According to 10x, Bitcoin is trending to recover after softer-than-expected Consumer Price Index (CPI) reports, and they anticipate this trend to continue.
Latest Fed decision and market reaction
On Wednesday, the US Federal Reserve kept the benchmark interest rate stable between 5.25% and 5.5%, as expected. However, the Federal Reserve’s forecast of a single rate cut by 2024, a reduction from the three cuts forecast in March, shook markets. This conservative outlook, coupled with a lower-than-expected CPI release that same day, caused Bitcoin prices to drop.
The leading cryptocurrency by market value fell to $67,400 after the Federal Reserve’s announcement, reversing its post-CPI rise to $70,000, according to data from CoinDesk.
10x Research’s Bullish Stance on Bitcoin
Despite this setback, 10x Research remains optimistic about the future of Bitcoin. Founder Markus Thielen reiterated his strategy of favoring Bitcoin over other cryptocurrencies such as Ethereum. “Our advice remains the same: stick with Bitcoin and avoid others. Historical data shows that lower CPI numbers typically boost Bitcoin prices, and we expect this trend to persist,” Thielen said in a note to clients on Thursday.
Inflation and ETF inflows
The US consumer price inflation rate remained stable in May, below the expected increase of 0.1% and below the 0.3% in April. The year-on-year inflation rate was 3.3%, matching expectations and slightly below April’s 3.4%. Thielen noted that declining inflation rates have historically led to significant inflows into US-listed Bitcoin exchange-traded funds (ETFs). Data from Farside Investors indicated that these ETFs attracted $100 million on Wednesday, breaking a two-day streak of outflows.
Thielen highlighted that ETF inflows stagnated after their debut on January 11, when the December CPI exceeded expectations, dampening hopes of Fed rate cuts. However, inflows resumed in February, driving up Bitcoin prices.
Future expectations
“ETF inflows turned positive in late January, but began to accelerate slightly before the release of CPI data on February 13. When inflation rose again to 3.2% on March 12, Bitcoin ETF inflows paused as the market ruled out the possibility of two or three rate cuts,” Thielen explained.
Thielen expects the Federal Reserve to signal additional rate cuts later this year, believing inflation has already peaked. This planned change could renew investor confidence in Bitcoin and potentially drive prices up.
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