Bitcoin Above $69,000 as Inflation Shows Signs of Easing Ahead of Fed Meeting
Bitcoin prices have surged above $69,000 as inflation shows signs of easing. This change comes just before an important meeting of the Federal Reserve, where decisions on interest rates could impact the crypto market.
Inflation and Federal Reserve Decisions
U.S. prices rose slightly in June, suggesting that inflation is cooling down. This could allow the Federal Reserve to cut interest rates in September. Lower interest rates often lead to higher prices for risk assets, including Bitcoin and other cryptocurrencies.
The Commerce Department reported that consumer spending slowed a bit last month. This, combined with easing price pressures and a cooling labor market, may boost the Federal Reserve’s confidence. They aim to bring inflation down to their target of 2%.
The price index of personal consumption expenditures, the Fed’s preferred measure of inflation, rose by 0.1% last month after being unchanged in May. Compared to last year, it increased by 2.5%.
Impact on Bitcoin and Crypto Prices
A cut in interest rates could help lift crypto prices as borrowing becomes cheaper for investors. Some analysts predict Bitcoin could reach as high as $100,000 this year. Currently, Bitcoin is trading at $69,200 according to CoinGecko data.
The Fed’s next policy meeting is set for July 30-31. The CME’s FedWatch tool, which looks at Fed funds data from derivatives traders, shows a 95.5% chance of no rate cuts this month. However, the probability of a 25 basis point cut in September is above 85%, with a 14% chance of an even larger cut.
Political Influences
Earlier this month, former President Donald Trump warned Fed Chairman Jerome Powell against politicizing interest rates ahead of the U.S. election. Trump believes that cutting rates before the election could boost voter confidence in the economy and help the Democrats retain the White House.
Trump previously stated that the central bank might cut interest rates before the election but added that “it’s something they know they shouldn’t be doing.” He also said he wouldn’t remove Powell from his job before his term ended, provided he was “doing the right thing.”
Bitcoin and U.S. Politics
The upcoming U.S. election is placing additional pressure on the Federal Reserve to remain impartial. However, Bitcoin might benefit from a change in leadership in Washington, D.C. Some experts believe that Bitcoin’s price will closely follow the likelihood of Trump being re-elected.
Rich Rosenblum, co-founder of trading firm GSR, tweeted that “Bitcoin will spend the next four months highly correlated to the probability that Trump is elected.”
At the Bitcoin 2024 conference in Nashville, Trump spoke to a crowd of 20,000 people. He promised to build a “strategic Bitcoin stockpile” and vowed to keep 100% of the Bitcoin the U.S. government currently holds or acquires on home soil.
Despite Trump’s speech having little immediate impact on Bitcoin’s price, his crypto policy promises have made it difficult for Vice President Kamala Harris to counter. Rosenblum tweeted that Harris’ policy lacks any focus on the Securities and Exchange Commission and government-held Bitcoin.
Bitcoin Nears All-Time High
Bitcoin has been pushing toward the $70,000 mark, coming within 6% of its all-time high. On July 29, Bitcoin posted a seven-week high, reaching $69,775 during Asia trading hours. This is the highest Bitcoin has traded since June 13, when it hit $70,000 but faced resistance and retreated.
Analyst “Titan of Crypto” told his 86,000 followers on social media that Bitcoin at $110,000 “is programmed” as the asset is “breaking out from the handle” of a cup and handle chart pattern.
Positive Sentiment in the Crypto Market
Recent positive sentiment around Bitcoin has been driven by two U.S. presidential candidates and a prominent Republican senator at the Bitcoin 2024 conference. Independent presidential candidate Robert F. Kennedy Jr. and Senator Cynthia Lummis spoke about establishing a strategic Bitcoin reserve for the U.S. Meanwhile, former President Donald Trump said the government wouldn’t sell any more Bitcoin if he got elected. This could create a lot of buying pressure and a potential supply shock to Bitcoin markets.
Inflation and Interest Rates
The Personal Consumption Expenditures index rose just 0.1% in June, increasing confidence in an interest rate cut in September as inflation comes under control. The Federal Reserve will meet on July 31, and another rate decision is expected. However, the market expects the Fed to keep rates unchanged. The CME Group predicts a 95.9% chance that rates will remain at 5.25% to 5.5%.
Future of Bitcoin Prices
Signals are strengthening for a rate cut in September, with the odds at 85.8% for a cut to 5.0% to 5.25%. This would be the first reduction since March 2020. If this happens, it could provide a significant boost to Bitcoin prices.
Bitcoin’s recent performance and the potential for lower interest rates create an optimistic outlook for the cryptocurrency market. Investors are keeping a close eye on the Federal Reserve’s actions and political developments in the U.S., as these factors will likely influence Bitcoin’s future price movements.
With inflation showing signs of easing and the possibility of interest rate cuts, the crypto market may see increased investment and higher prices in the coming months. The connection between Bitcoin’s price and political events highlights the growing importance of cryptocurrency in the global financial landscape. As we approach the U.S. presidential election, Bitcoin’s performance will be closely watched by investors and policymakers alike.
Bitcoin’s rise above $69,000 amidst easing inflation and potential interest rate cuts presents a promising scenario for the crypto market. The Federal Reserve’s upcoming decisions and the political landscape will play a crucial role in shaping the future of Bitcoin and other cryptocurrencies. Investors should stay informed and be prepared for potential shifts in the market as these events unfold.
