1 min readMacroeconomic factors reassert their influence on digital assets — what's next?
We believe that the majority of price movements observed over the past week are primarily related to macroeconomic factors. Firstly, the GDP growth figures released last week were significantly lower than anticipated. Simultaneously, the core PCE, a key measure of inflation, was much higher than expected, which has fueled fears of stagflation. This situation led to expectations that the Federal Reserve (Fed) would adopt a more hawkish stance in its Wednesday meeting, consequently causing notable declines in Bitcoin prices. However, it appears that the Fed is in a difficult position: it cannot raise interest rates without stifling growth prospects, nor can it cut rates due to concerns over inflation. Despite these challenges, the sentiment from the Fed meeting was more dovish than anticipated. We now expect the Fed to cut interest rates later this year, though later than initially expected and will likely be supportive for bitcoin prices at this point.
The recent drop in prices has triggered significant outflows; the average price at which investments were made into US Bitcoin ETFs is approximately US$62,000. These price dips are likely to have triggered sell orders, exacerbating the decline. Additionally, we have observed a dramatic fall in hash price, an indicator of Bitcoin mining profitability. As a result, we anticipate that some miners may start to deactivate their rigs as the effects of the halving begin to take hold.
