10x Research Stands by Bitcoin Amid Fed’s Hawkish Stance and Market Volatility
Despite the recent pressures on Bitcoin following the Federal Reserve’s hawkish interest rate projections, 10x Research remains bullish on the leading cryptocurrency. This steadfast confidence comes in the wake of the U.S. central bank’s decision to keep the benchmark borrowing cost unchanged between 5.25% and 5.5%. However, the Fed’s prediction of just one rate reduction this year, compared to the three forecasted in March, has rattled the markets.
Market Reaction and Current Bitcoin Performance
After the Fed released its rate projections, Bitcoin’s price retreated to $67,400 from a post-CPI high of $70,000. The U.S. consumer price inflation (CPI) rate for May was flat, missing the consensus estimate of a 0.1% rise and marking a decrease from April’s 0.3%. The year-on-year rate stood at 3.3%, consistent with estimates and a slight decline from April’s 3.4%.
10x Research’s Analysis and Forecast
Markus Thielen, the founder of 10x Research, maintains a positive outlook on Bitcoin. He emphasizes that a lower CPI number typically boosts Bitcoin prices, a trend he expects to continue. Thielen’s note to clients on Thursday reiterated the firm’s stance:
“Our recommendation remains unchanged: to stick with the winners (Bitcoin) and avoid others (such as Ethereum). Our previous analysis has shown that a lower CPI number tends to lift Bitcoin prices, and we anticipate this trend will continue.”
Thielen points to historical data indicating that a slowdown in inflation has historically attracted significant inflows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs). On Wednesday, preliminary data from Farside Investors showed that Bitcoin ETFs gathered $100 million, breaking a two-day streak of outflows.
Historical Context and ETF Flows
Bitcoin’s price trend is closely linked to U.S. CPI figures. Thielen notes that ETF flows dried up after their debut on January 11, as the December CPI exceeded expectations, weakening the case for Fed rate cuts. However, these flows resumed in February, pushing Bitcoin prices higher.
“ETF flows turned positive at the end of January but only started to accelerate slightly ahead of the CPI data release on February 13. But when inflation again increased to 3.2% on March 12, Bitcoin ETF inflows stopped as the market priced out the narrative of 2-3 rate cuts,” Thielen highlighted in his May analysis.
Future Expectations
Looking ahead, Thielen expects the Fed to signal more rate cuts later this year as inflation is believed to have peaked. This potential shift in monetary policy could further support Bitcoin’s price recovery and subsequent rally.
In summary, despite the short-term volatility caused by the Fed’s recent rate predictions, 10x Research remains optimistic about Bitcoin’s long-term prospects. The firm’s analysis suggests that Bitcoin will benefit from lower inflation and the potential for future rate cuts, reinforcing its recommendation to focus on Bitcoin over other cryptocurrencies like Ethereum.
