Bitcoin
Bitcoin (BTC) Prices Post Biggest Gain in 2 Months as Markets Anticipate a “Summer of Easing”
Bitcoin (BTC) posted its biggest single-day gain in nearly two months on Wednesday, as weak U.S. economic data raised the likelihood that the Federal Reserve (Fed) will join its advanced country peers in easing monetary policy with rate cuts. rates during the summer months.
According to data sources TradingView and CoinDesk, the leading cryptocurrency by market cap rose more than 7.5% to $66,250, the biggest percentage increase since March 20. Like other risk assets, BTC is sensitive to expected changes in the monetary policy stance of major central banks and recovers when the cost of borrowing fiat currency is predicted to decline.
Data released by the US Department of Labor on Wednesday showed the consumer price index (CPI) increased less than consensus estimates in April, signaling a further decline in the cost of living in the world’s largest economy. The headline CPI rose 0.3% last month, after advancing 0.4% in March and February. The core CPI, which excludes food and energy prices, rose 0.3% in April, after rising 0.4% in March.
Other data showed this headline retail sales growth stagnated in April, with sales in the “control group” category, which contributes to the GDP calculation, falling 0.3% month-on-month.
As such, rate reduction expectations have changed significantly. Fed Funds Futures Show Investors expect the Fed to make its first 25 basis point rate cut in September. (This year’s summer is set to begin on June 20th and ends on September 22nd). The Fed recently signaled that it will reduce the pace of quantitative tightening, also a liquidity tightening tool, starting in June.
It’s not just the Fed. Markets wait the Bank of England (BOE) and the European Central Bank (ECB) will cut rates in June. O Swiss National Bank (SNB) and Sweden Riksbank have already reduced their benchmark financing costs.
Central banks around the world are moving towards further monetary or liquidity easing, which is a positive sign for risky assets, including cryptocurrencies, as evident in the chart below from data tracking site MacroMicro .
The percentage of global central banks whose last move was a rate hike is falling rapidly, while the percentage of banks that cut rates as their last move is rising.
In other words, the net percentage of central bank rate cuts is increasing.
“The higher the ratio, the more central banks are cutting rates, which could help improve market liquidity. The lower the proportion, the less liquidity there is in the market”, MacroMicro said in the explainer.
The prospects for easing liquidity over the summer should support equities, giving investors adequate confidence “to remain further down the risk curve”, according to Pepperstone brokerage.