Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

The price of Bitcoin (BTC) decreased by 0.5% when the stock market opened on Wall Street on April 10. This reaction came after the release of the US Consumer Price Index data, which showed an unexpected increase.

Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

Federal Reserve’s June rate cut likely gone after today’s CPI print

Based on the information from CryptoMoon Markets Pro and TradingView, the price of Bitcoin (BTC) dipped by approximately 2.5% on April 10. The lowest point during the day reached $67,463 on Coinbase, which is a decrease from the opening price of $69,115.

Bitcoin’s price responded to surprising inflation data in March, as the Consumer Price Index (CPI) showed a 0.4% month-on-month rise and a 3.5% year-over-year increase. This was higher than the anticipated monthly growth of 0.3% and the annual growth of 3.4%, according to the Dow Jones economists’ survey.

The Core Consumer Price Index, which disregards the influence of fluctuating food and energy costs, grew by 0.4% month-over-month in March, while registering a 3.8% increase year-over-year. This surpassed expectations of a 0.3% monthly gain and a 3.7% annual rise. Meanwhile, the overall CPI saw an annual inflation rate of 3.2% for all goods in March.

In March, both the shelter and gasoline indices experienced upward shifts. Together, these two indices accounted for more than half of the total monthly growth in the overall index. The energy index recorded a 1.1% rise, while the food index saw a minimal increase of 0.1%. The index for food consumed at home remained stable, but the index for food eaten away from home went up by 0.3%.

Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

Some market players started discussing the likelihood of the Federal Reserve reducing interest rates sooner rather than later, moving from a predicted June action to a later date in the year.

Based on the data from the CME’s FedWatch tool, there is a 20.6% chance of a rate cut by the US Federal Reserve in June, compared to a higher probability of 45.9% for a rate cut in September. Essentially, most market analysts anticipate that the Fed will keep interest rates unchanged in May and June, with the first potential reduction taking place in September.

Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

According to The Kobeissi Letter’s analysis, the markets anticipate only two interest rate reductions in the entire year 2024 based on current interest rate futures.

“Odds of a rate cut in June are down from ~60% before the CPI report to ~22% now.”

The Kobeissi Letter stated that it’s unprecedented in financial history for markets to anticipate fewer interest rate reductions than the Federal Reserve has indicated.

Inflation data accompanies negative spot Bitcoin ETF flows despite upcoming halving

Currently, decreasing investments into Bitcoin spot ETFs are weakening the near-term perspective for Bitcoin investors.

Approximately $154.9 million worth of Bitcoin left the Grayscale Bitcoin Trust (GBTC) on April 9, based on figures gathered by BitMEX Research.

In total, Bitcoin ETF investments experienced withdrawals amounting to $18.7 million, representing the second day in a row with decreased investment.

Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

On April 10, BlackRock’s iShares Bitcoin Trust (IBIT) received the largest investment of approximately $128.7 million. Bitwise’s ETF (BITB) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) followed closely with inflows exceeding $3.8 million and $3 million, respectively. No new investments were recorded for any other ETFs on this date.

A decrease in Bitcoin ETF investments flowing in at a slower pace suggests waning investor enthusiasm for these products, with caution taking the helm. However, the market maintains its optimistic outlook on Bitcoin’s price increase following the upcoming halving event, which is just under ten days away.

Vijay Pravin Maharajan, the founder and CEO of bitsCrunch, recognizes the significance of the approaching Bitcoin miner reward reduction. He believes this event might push Bitcoin’s price to unprecedented peaks and bring about favorable consequences for several other assets as well.

“Consequently, investors might anticipate a reinitiation of the bull market in the latter half of Q2.”

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2024-04-10 20:41