Bitcoin Price Stagnates Despite Slowing US Inflation: Here's Why

The US Bureau of Labor Statistics (BLS) has released the June Consumer Price Index (CPI) for the United States, showing a year-on-year increase of 3%. This figure is below market expectations of 3.1% and lower than the 3.3% recorded in May 2024.

Despite the drop in inflation, which is typically seen as bullish for Bitcoin (BTC), the cryptocurrency's price only briefly rose to $58,000 before falling back to $57,000 within the last 24 hours.


Several factors appear to have contributed to Bitcoin's inability to maintain its gains amid the falling US inflation rate.

Uncertainty Around Interest Rate Cuts

Jag Kooner, Head of Derivatives at Bitfinex, noted that the lower CPI reading has bolstered market expectations for a potential interest rate cut in September, with Fed Fund futures placing the probability at 70%. However, the anticipated rate cut has not materialized, with Federal Reserve Chairman Jerome Powell stating that the Fed is not yet ready to lower rates. This cautious stance from the Fed has added a layer of uncertainty, contributing to Bitcoin's struggle to break through the $58,000 level.

Scalpers, Market Makers, and Investor Sentiment

According to Cointelegraph, analyst Daan Crypto attributes Bitcoin's current weakness to scalpers and market makers attempting to liquidate leveraged long positions. Despite this, Daan Crypto believes that the trend supports a higher continuation, suggesting that Bitcoin will rebound to $60,000 in the near future. The rationale is that if the US central bank cuts interest rates, the incentive for fixed-income investments will decrease, prompting some of that money to flow into higher-yielding assets like Bitcoin.

conclusion

Bitcoin's price stagnation despite the slowing US inflation can be attributed to a combination of market dynamics and macroeconomic factors. The anticipated interest rate cuts have not yet been realized, adding uncertainty and affecting investor confidence. Federal Reserve Chairman Jerome Powell's cautious stance has further contributed to the lack of immediate bullish momentum for Bitcoin, despite lower inflation figures which would typically be favorable for the cryptocurrency.

Additionally, market activities involving scalpers and market makers attempting to liquidate leveraged positions have created short-term price pressures. However, the longer-term outlook remains positive, as a potential future interest rate cut by the US central bank could shift investments from fixed-income assets to higher-yielding assets like Bitcoin. This scenario suggests that while Bitcoin's price may face short-term challenges, its prospects for recovery and growth remain strong.

Read too : Analysts Predict Ethereum Will Outperform Bitcoin: Here’s Why!

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