Bitcoin and other cryptocurrencies registered a modest increase on Tuesday but remained constrained within a familiar trading range. Some experts believe that the recent surge in prices may be premature, especially with the imminent release of inflation data and the still uncertain outlook for interest rates.
Over the past 24 hours, the price of Bitcoin has seen a 1.5% rise, reaching $30,500. This places it firmly within the trading range of $30,000 to $31,000, where it has hovered for several weeks amidst a period of stagnation. While Bitcoin experienced a rally in June when news broke about traditional financial players like BlackRock filing for spot Bitcoin exchange-traded funds (ETFs), that momentum appears to have dissipated as a decision on the matter is still pending.
Brent Xu, CEO of Umee, a decentralized finance bond-market platform, voiced his opinion on the situation, saying, “I believe the bullish sentiment surrounding Bitcoin is becoming somewhat premature. The initial momentum generated by the various spot Bitcoin ETF applications seems to be tapering off now.”
With a lack of specific catalysts within the cryptocurrency market, Bitcoin’s movement on Wednesday is likely to track alongside the Dow Jones Industrial Average and S&P 500. This will be particularly influenced by the release of the consumer price index (CPI) for June. The CPI serves as a crucial gauge of inflation and is one of the final key economic indicators in the United States before the Federal Reserve makes its next decision on interest rates at the end of the month.
The Fed’s Aggressive Rate Hikes Shake Risk Assets
The Federal Reserve has taken a firm stance against the high levels of inflation by aggressively raising rates since March 2022. This approach has resulted in a significant impact on risk-sensitive assets such as stocks and cryptocurrencies. During periods of rate and bond yield increases, these assets tend to fall. Although there was initial optimism that the worst of the financial tightening had passed, Fed officials have reiterated their tough stance on inflation, creating an uncertain outlook.
Cryptocurrency traders are wary of the potential downside risks that lie ahead. Market pricing indicates an expectation of rate hikes in July and possibly September, fueling concerns over the fate of cryptos.
Market volatility is expected to rise as the market adjusts to these higher-than-usual rate hikes. Many experts, including Xu, suggest that the recent bounce in risk assets is likely to be short-lived. A pullback, potentially a major one, seems imminent for risk assets in general. Instead of expecting a bullish market, smarter traders are preparing for choppy months ahead.
The Crypto Landscape
While Bitcoin continues to capture attention, Ether, the second-largest crypto, has experienced a 1% gain, reaching $1,875. Similarly, smaller altcoins have been on the rise. Cardano has climbed 3% while Polygon has seen a significant increase of 9%. On the other hand, memecoins like Dogecoin and Shiba Inu have demonstrated more muted growth with a 1% increase each.
