Bitcoin
Big Bitcoin Price Swings Expected in July as Traders Eye US Economy
Bitcoin could be in for a rocky start this month as traders look to second-guess U.S. economic activity amid a persistent inflation climate and a Big Tech-fueled stock market rally.
U.S. real gross domestic product (GDP) jumped at an annual rate of 1.4% in the first quarter of 2024, according to the third estimate published by the Bureau of Economic Analysis.
Thursday’s figures contrast sharply with results from the fourth quarter of last year, which showed U.S. economic activity had increased by 3.4%.
Data from the agency also showed that May’s personal consumption expenditure index, a key indicator of inflation, fell to an annual increase of 2.6%, down from 2.7% in April.
“This slowdown suggests a potential economic slowdown,” said Jag Kooner, head of derivatives at Bitfinex. Decipher. “Looking ahead to July, market participants should be wary of a return to volatility as additional regulatory developments and macroeconomic policies will play a crucial role.”
In cryptocurrencies, this could increase interest in Bitcoin and other digital assets as alternative investments if traditional markets show signs of weakening, Kooner added.
A slowing economy could also prompt the U.S. Federal Reserve to start cutting rates this year. The Fed has kept interest rates high in an attempt to manage price stability and prevent economic overheating.
Cheaper, lower-rate loans could flow into risky assets including Bitcoin, analysts say.
“Historical trends indicate that during economic downturns, investors often turn to Bitcoin as a store of value,” said Kooner.
More clues about Fed policy are expected at the next Federal Open Market Committee meeting, scheduled for July 30th and 31st. Meanwhile, futures traders are pricing two rate cutsexpected in the last quarter of this year.
While some anticipate greater volatility in July, others remain skeptical.
“July will be a period of consolidation and low volatility,” said Pratik Kala, head of research at crypto fund manager DigitalX. Decipher. “Bitcoin is looking for the next big catalyst for an upward move. None are on the horizon, but that is expected to change as we approach the US elections.”
Seasonality is also important. The third quarter is seen as a period of low volatility, since most top U.S. decision-makers are typically on vacation, Kala added.
The world’s largest cryptocurrency hit its highest point in a week on Sunday night, nearing $63,700, CoinGecko data shows. Bitcoin is down 14% from its March all-time high near $73,800.
Edited by Stacy Elliott.