Bitcoin price turned downward as it failed to surpass $67,500, accelerated by recent US data. BTC dropped to its 24-hour low at $62,794. What is stagflation? Why do US data cause declines in cryptocurrencies? Here are the details.
Stagflation and the Crypto Decline
Today, the US received GDP and personal consumption expenditures data. Following stagflationary data, Bitcoin prices began to fall. Stagflation refers to the situation where unemployment rates and economic stagnation occur while prices rise. The US Q1 GDP coming in at 1.6%, significantly below expectations, fueled these concerns and led to a roughly 2% drop in US markets at the start of the day.
The Kobeissi Letter wrote;
“If 1.6% is the final reading, it will end six quarters of over 2% growth. However, we haven’t experienced two consecutive quarters of declining GDP since the second quarter of 2022. What should the Fed do if inflation rises while the economy weakens? Lowering interest rates will spike inflation. Raising rates will crash the economy. This doesn’t look like a soft landing.”
With GDP figures coming in about 50% lower than Goldman Sachs’ predictions, upcoming assessments from Fed members are gaining importance.
Will Cryptocurrencies Rise?
On the macroeconomic front, things are getting complicated. Core PCE is strong, inflation is rising, unemployment isn’t falling as expected, and the economy is contracting. It’s not a usual situation, and the Fed may have to choose between two difficult options. If it signals the start of interest rate cuts, it will deviate from the 2% inflation target.
Bitcoin needs a scenario of monetary expansion, and expectations for a rate cut at the Fed’s May 1 meeting have dropped to 6.3%. Meanwhile, popular crypto analyst Crypto Chase expects the king cryptocurrency to rise to $68,000.
Crypto Tony also says that after a consolidation period, BTC will see new highs.
Meanwhile, analyst Caleb Franzen highlights $59,530 as a critical support level for short-term investors. If BTC falls below this cost level, the popular analyst wrote that he would turn bearish.
