PANews reported on May 13 that CoinShares published a report last weekend saying that this year, when the spot Bitcoin ETF was approved in the United States in January, the factor affecting Bitcoin prices was no longer the interest rate narrative. Since then, as ETF flows have decreased, Bitcoin prices have re-aligned with market expectations of interest rates. The Federal Reserve faces a challenging dilemma: it needs to control continued inflation while supporting a weak U.S. economy. In the long run, this dilemma may be good for Bitcoin.
In the past week, market trends have been mainly affected by macroeconomic factors. The study pointed out that the consistency with interest rate expectations in June has increased, similar to the trend in 2023. Last week's GDP growth was lower than expected, while the core PCE inflation data was much higher than expected, exacerbating stagflation concerns. Stagnant growth in the service industry and high price payments show huge price pressures. The Federal Reserve maintained a hawkish stance at its meeting on Wednesday, and the price of Bitcoin fell sharply. However, the Fed's quantitative tightening (QT) announced in June was reduced to $25 billion, which exceeded market expectations, showing its policy dilemma. The market expects the Fed to cut interest rates later this year to respond to the weak job market.
The recent price drop has led to outflows from US spot Bitcoin ETFs, where the average investment is about $62,000. The market seems to be overreacting to short-term economic data, ignoring long-term weak growth and government debt issues. Given the fixed supply of Bitcoin, when the Fed cuts interest rates (which may be larger and later than expected), it will support Bitcoin prices. The market needs to focus on long-term trends and avoid being confused by short-term fluctuations.