- Market observers are offering mixed signals on the impact of the Fed’s macro outlook on BTC and crypto.
- BTC fell to $67,000 after the Fed’s decision and was in danger of further losses.
Bitcoin [BTC] struggled to hold above $67,000 after the Fed decided to keep current rates at 5.25% to 5.5% for the seventh time.
However, the Fed’s economic projection and future guidance at the meeting have led to diverging macro views on the impact on risky assets like BTC.
A commentary from JPMorgan declared that the Fed’s “monetary outlook remained uncertain.” This was based on the possibility of just one cut by the end of 2024, as opposed to the three cuts predicted at the March meeting.
Does BTC face macro risks in the third quarter?
Uncertainty was further heightened by Fed Chairman Jerome Powell’s “lack of confidence” in recent inflation data. The Chairman noted,
“It will probably take longer before we gain confidence that we need to relax the policy.”
For his part, Quinn Thompson, founder and CIO of crypto hedge fund Lekker Capital, viewed the Fed’s prospects as a risk to crypto assets. The executive is predicting a similar liquidity crisis that hit BTC before the US tax season in April said,
“I believe the ‘liquidity air pocket’ that started at the end of the first quarter leading up to tax season is still with us until there is another month or so of better inflation data to reinforce the current disinflationary trend”
Building on the potential risk to crypto assets, the hedge fund executive said added,
“I think there is a serious cascade risk in crypto, and I especially expect that most altcoins will be withdrawn. It appears the market has lost any ability to recover.”
Thompson further cast doubt on BTC’s prospects over the summer, stating that the king coin has failed to gather enough strength to break above its all-time high.
However, other market observers, such as crypto trading firm QCP Capital, acknowledged the Fed’s ambiguity but remained optimistic for the rest of 2024. In a recent Telegram update, the company said noted,
“We maintain a structurally bullish outlook for the remainder of the year, driven by the expected approval of ETH ETF S-1 and potential rate cuts in September and year-end.”
At the time of writing, the chances of the interest rate cut in September increased by +60% compared to 30% as the current interest rate remained unchanged.
Source: CME
Another macro analyst, TedTalksMacroshared the positive outlook and viewed May’s US CPI print as “disinflationary” and bullish for crypto in the short term.
Meanwhile, the daily liquidation charts at the time of writing showed significant liquidity clusters at $66K and $68K (highlighted in orange).
Typically, price action focuses on these liquidity areas, and this suggested that a retest of the $66,000 and $68,000 levels was feasible in the near term.
Source: Coinglass