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Bitcoin (BTC) fell to $59,500 on Binance ahead of tomorrow’s Federal Open Market Committee (FOMC) meeting. Market participants are bracing for a hawkish stance from the Federal Reserve, with expectations of no interest rate changes.
According to the CME FedWatch tool, only 4.4% of economists expected a rate cut (the first in a decade), while 95.6% expected rates to remain stable between 525 and 550 basis points.
According to Kobeissi Letter, based on current market data, there is a 36% chance that there will be no rate cut this year. Just four months ago, the probability of maintaining the current interest rate was only about 3%.
This year, expectations changed with just one reduction. Previously, the market expected six interest rate cuts. Additionally, the probability of experiencing rate cuts more than twice decreased to 31%.
You cannot create this:
According to prediction markets, there is currently a 36% chance of a 2024 rate cut of 0%. @Calsi.
To put this in perspective, four months ago there was about a 3% chance of no rate cut in 2024.
The base case changed from six rate cuts this year to one rate cut… pic.twitter.com/mTQMDAz99K
— Kobeissi Letter (@KobeissiLetter) April 25, 2024
stagflation risk
In this financial environment, the United States faces the risk of stagflation as inflation continues and economic growth slows.
GDP growth slowed to 1.6% in the first quarter of 2024, below the forecast of 2.2% and down from 3.4% in the previous quarter. At the same time, the US core PCE inflation index rose from 2.0% to 3.7%.
Federal Reserve Chairman Jerome Powell said recent data does not make the Fed more confident, suggesting a longer timeline is needed to restore economic stability. He expressed belief in the adequacy of current policy to navigate the immediate risks and hinted that high interest rates would persist even without an increase.
Bitcoin’s trajectory reflects this economic uncertainty, falling below $62,000 earlier in the week amid renewed stagflation concerns.
The launch of a spot Bitcoin and Ethereum ETF in Hong Kong yesterday sparked a brief rally above $64,000, but the momentum was short-lived as investors remained cautious ahead of a key decision from the Federal Reserve.
Spot Bitcoin ETF inflows slow
The market has also seen a noticeable slowdown in spot Bitcoin ETF inflows, with BlackRock’s iShares Bitcoin Trust (IBIT) pausing new inflows for several days for the first time since its launch. Meanwhile, other funds, including Grayscale Investments, also experienced continued outflows.
Bitcoin’s price has been stagnant since its fourth halving. Bitcoin is currently trading at around $60,100, down more than 6% in the last 24 hours, according to data from CoinGecko, likely ending a sustained growth streak that has lasted since last September.
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