Cryptocurrency investors are significantly influenced by macroeconomic developments. Bitcoin is in a very different place than yesterday. As more cash flows from traditional finance, the impact of macroeconomic developments will be felt more.
European Central Bank Statements
In mid-2021, the Fed viewed inflation as temporary, but it has become a major global issue. Historic levels of global inflation have led central banks to collectively raise interest rates. This increased the cost of money, triggered an exit from risk markets, and caused tough times for cryptocurrencies.
This year will see central banks starting to cut interest rates. The first strong signal came from the European Central Bank, which announced a rate cut in June. Hopefully, the Fed will follow by September at the latest. Villeroy from the European Central Bank stated:
“Unless there is a surprise, the rate cut in June is confirmed. The market’s current expectations of our final interest rate are not unreasonable. For me, service inflation, wages, or margins are more important. With a 4% deposit facility rate, we have significant room for a rate cut.”
