Stick With Bitcoin, Avoid Ether, 10x Research Says After Fed Predicts Just One Rate Cut For 2024

On Wednesday, the Federal Reserve kept its benchmark lending rate at the range of 5.25% to 5.5%, as anticipated. However, the central bank now forecasts only one interest rate reduction in 2023 instead of the three predicted earlier in March. The revised outlook may have unsettled markets, contributing to a decline in bitcoin’s value following a softer-than-expected Consumer Price Index (CPI) release earlier in the day.

According to CoinDesk’s latest data, after the Federal Reserve revealed its interest rate outlook, Bitcoin, the most valuable cryptocurrency, retreated to a price of $67,400, erasing the post-Consumer Price Index (CPI) surge to $70,000.

Despite 10x Research’s optimistic stance, they believe that Bitcoin’s rally will pick up momentum once again.

Markus Thielen, the founder of 10x Research, advised clients in a note published on Thursday that they should stay the course with their current investments in Bitcoin and not consider Ethereum or other alternatives. According to Thielen’s previous analysis, a decrease in Consumer Price Index (CPI) figures has historically led to an increase in Bitcoin prices. He believes this trend is likely to persist.

As a researcher examining recent economic data, I’ve discovered that the consumer price inflation rate in the United States remained unchanged at a 0.0% increase in May. This figure fell short of the anticipated 0.1% rise based on experts’ consensus estimates. Moreover, the yearly inflation rate settled at 3.3%, which is consistent with predictions but lower than the previous month’s 3.4%.

As an analyst, I’ve observed that a decrease in inflation, according to historical trends, often triggers substantial investments into U.S.-listed spot Bitcoin exchange-traded funds (ETFs). Recent data from Farside Investors indicates an inflow of approximately $100 million into these ETFs on Wednesday, marking an end to a two-day streak of outflows.

As an analyst, I’ve observed that the inflow of funds into the ETF stalled following its launch on January 11 due to the unexpectedly high December Consumer Price Index (CPI) reading. This development weakened the argument for Federal Reserve interest rate cuts and consequently, the bitcoin market took a hit. However, in February, the inflows resumed, fueling an upward trend in bitcoin’s price.

At the end of January, there was a rise in investments made into Exchange-Traded Funds (ETFs). However, this trend only began to pick up pace slightly before the Consumer Price Index (CPI) data was released on February 13. But when inflation rose to 3.2% on March 12, the inflows into Bitcoin ETFs came to a halt as investors factored out the expectation of 2-3 interest rate cuts. Thielen mentioned this observation towards the end of May.

Thielen expects the Fed to signal more rate cuts later this year as inflation has already peaked.