Bitcoin
Stick with Bitcoin, Avoid Ether, Says 10x Survey After Fed Predicts Just One Rate Cut for 2024
10x Research continues to defend bitcoin even as the top cryptocurrency trades under pressure following the Fed’s aggressive interest rate projections.
On Wednesday, the US central bank left the benchmark borrowing cost unchanged in the range of 5.25% to 5.5%, as expected. however foreseen just one rate reduction this year, down from three in March. Given the softer-than-expected CPI release earlier in the day, the Fed’s new rate forecast likely spooked markets, causing bitcoin to fall.
The leading cryptocurrency by market cap has retreated to $67,400 since the Fed released rate projections, reversing the post-CPI jump to $70,000. CoinDesk data shows.
Yet, 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 anticipate this trend will continue,” Markus Thielen, founder of 10x Research, in a note to clients on Thursday.
The US consumer price inflation rate remained stable in May, missing the consensus estimate of a 0.1% increase and below the 0.3% in April. The year-on-year rate was 3.3%, corresponding to estimates and below the 3.4% in April.
According to Thielen, slowing inflation has historically attracted huge inflows into US-listed spot bitcoin exchange-traded funds. Provisional data for Distant investors show that ETFs accumulated $100 million on Wednesday, snapping a two-day streak of outflows.
Thielen explained that ETF flows dried up after their debut on Jan. 11 when the 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 only began to accelerate slightly before the CPI data was released on February 13. But when inflation rose again to 3.2% on March 12, flows Bitcoin ETFs stopped when the market priced in the narrative of 2-3 rate cuts,” Thielen noted in late May.
Thielen expects the Fed to signal more rate cuts later this year as inflation has already peaked.