According to Grayscale’s research head Zach Pandl, assets that hold value over time, like Bitcoin (BTC), will remain in demand due to the US government’s persistent overspending and maintained high-interest rates.
In simpler terms, Pandl told CryptoMoon that they believe high and continuous inflation as well as unmanageable government budget deficits will lead people to seek reliable investments, such as Bitcoin, to protect their wealth.
According to Pandl’s perspective, with present-day inflation running at a steep level, the Federal Reserve is expected to hold off on decreasing interest rates for some time. Nevertheless, significant happenings such as the upcoming Bitcoin halving on April 20 and surging economic expansion along with increased crypto acceptance are predicted to significantly impact Bitcoin’s price.
“The Fed won’t be able to cuts rates for a while with core inflation this high, but booming nominal growth, the Bitcoin halving, and adoption trends like tokenization should create a supportive environment for crypto markets.”
In March, inflation grew by 0.4% compared to the previous month and by 3.5% compared to the same month the previous year. This is higher than the predicted monthly increase of 0.3% and annual increase of 3.4% based on the estimates from the Dow Jones economists survey.
Many were disappointed by the result, as analysts shared Pandl’s fears that prolonged inflation may prevent the Fed from reducing interest rates in the coming weeks.
According to Greg Daco, the EY chief economist, the increase in inflation rates means that policymakers must maintain their accommodative monetary policy for an extended period.
Despite Pandl’s observation that a rise in the real interest rate may temporarily dampen the crypto market, he maintains that the appeal of cryptocurrencies as stores of value will endure in the long run.
Looking at the big picture, the 10-year real interest rate jumped by nearly 20% over the past month, reaching 1.934%, significantly higher than February’s figure of 1.616%. This substantial increase may motivate investors to shift their funds towards more stable investments like bonds and term deposits.
Over the past few years, it’s common to see the 10-year real interest rate suddenly increase significantly in a single month, which has historically led to a noticeable decrease in Bitcoin’s value.
The real interest rate, as reported by the Federal Reserve Bank of St. Louis, jumped by over half (52.35%) between December 2017 and January 2018. This increase raised the rate from 0.573% to 0.873%.
During this timeframe, Bitcoin‘s value dropped significantly, going from around $12,839 at the close of December 2017 down to $9,240 by the end of January 2018, equating to a decrease of approximately 28%.
After the latest Consumer Price Index update, Bitcoin‘s price dipped slightly, reflecting a similar attitude among investors.
According to data from CryptoMoon Markets Pro and TradingView, the Bitcoin price dipped by approximately 2.5% on April 10, reaching a low of $67,463 on Coinbase during that day.
At the time of publication, Bitcoin’s price stands at $70,640, as per CoinMarketCap data.
On his blog post dated April 11th, cryptocurrency expert Matthew Hyland pointed out an ascending triangle pattern in Bitcoin’s price chart. He explained that Bitcoin had recently set a new resistance level above $71,500, peaking at $72,329 on April 8th.
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2024-04-11 06:18