Bitcoin optimism fades as turmoil and interest rates present challenges
Bitcoin (BTC) fell lower over the course of the past week as optimism faded among market participants over potentially higher interest rates in the US.
The price of the number one cryptocurrency has been on a largely bullish trend since news broke that the world’s largest asset manager, BlackRock, had filed to list a Bitcoin exchange-traded fund (ETF). In U.S.A.
Since June 16, the day news of the filing broke, BTC is up roughly 18%, despite being largely stuck in a range between $30,000 and $31,000 for the past two weeks.
Macro back in focus
However, with the news of the filing now behind us, the focus among traders has turned back to macroeconomic news, and in particular the prospects for even more rate hikes in the US.
At the last Fed meeting in June, Chairman Jerome Powell, for the first time in this hike cycle, put further hikes on hold and said holding the rate steady allows the Fed to “evaluate additional information and its implications.” for monetary policy.
And unfortunately for Bitcoin and other risky assets, some “additional information” arrived last week, when new data showed that hourly earnings in the US were higher than expected, raising the risk that the Fed will have to do more to cool the economy.
Market prices in new interest rate hike
According to a Bloomberg reportthe market is now fully pricing in a 25 basis point rate hike for the Fed meeting in July, with a 40% chance another hike will follow by the end of the year.
“The higher rates are having an impact. Bulls were already disappointed that Bitcoin failed to break out after the euphoria surrounding the BlackRock ETF filing. So this recent rise in interest rates is adding salt to the wound for those bulls,” Matt Maley, chief market strategist at Miller Tabak + Co., told Bloomberg.
Similarly, Stephane Ouellette, CEO of FRNT Financial Inc., also pointed out that risky assets generally suffer when rates rise, and Bitcoin, which is considered a high-risk asset, suffers more.
“Any speculators will be less incentivized to go up the risk curve as capital is generally more expensive,” Ouellette told Bloomberg.
Despite the general bearish sentiment, Ouellette hinted that Bitcoin might be better positioned to weather the rate-rising storm than other risk-on assets.
“That said, the blockchain data tells a clear story of the BTC-dominant investor profile as a long-term holder, who tends to be less sensitive to macro factors overall,” said the CEO of FRNT Financial.
The Fed’s next rate announcement is expected on July 26.