Declining Expectations for US Interest Rate Cuts... 2.81%↓ from Last Week [Bitcoin Now]

Coinbase "Optimistic After Mid-April"
Expecting Additional Inflows from Halving and Spot ETF

Last week, Bitcoin prices showed a rollercoaster trend, soaring above $71,000 before dropping below $65,000. This was due to strong U.S. inflation and employment data, which dampened expectations for interest rate cuts. However, there is optimism that the market will start to rebound after mid-April, supported by the upcoming halving event and anticipated additional inflows from institutional funds.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 6 PM on the 6th (Korean time), Bitcoin was priced at $68,031.41, up 1.31% from the previous day. Compared to a week ago, it fell 2.81%, but it has risen 143.38% compared to a year ago.

Bitcoin prices reached the $71,000 range until the 1st but plunged more than 5% on the 2nd, briefly falling below $65,000 during intraday trading. It then rebounded, recovering some of the losses, but on the 5th (local time), following the release of U.S. March employment data, it dropped to the $66,000 range before bouncing back to the $68,000 range.

The two sharp price drops on the 2nd and 5th were influenced by fading expectations for U.S. interest rate cuts. Earlier, the U.S. Personal Consumption Expenditures (PCE) price index met Wall Street expectations, and Federal Reserve Chair Jerome Powell stated there was no need to rush rate cuts, causing U.S. Treasury yields to rise. As of the 6th, the 10-year U.S. Treasury yield stood at around 4.4%, the highest since November last year. This is about 0.6 percentage points higher than the 3.8% at the end of last year. The 10-year U.S. Treasury yield is considered a global indicator of economic health.

The U.S. employment data released on the 5th (local time) also showed strength. According to the U.S. Department of Labor, nonfarm payrolls increased by 303,000 in March compared to the previous month, surpassing the Dow Jones expert forecast of 200,000 and the 12-month monthly average increase of 213,000. A strong labor market suggests sustained robust growth in the U.S. economy and potential earnings growth for U.S. companies.

Some have even suggested considering further rate hikes. Michelle Bowman, a Fed Board member, said at an event hosted by the Manhattan Institute think tank in New York on the 5th (local time), "If the inflation slowdown stops or reverses, I continuously think there is a risk that we may need to raise the benchmark interest rate further at future monetary policy meetings."

However, optimism still exists in the cryptocurrency market. Coinbase recently stated in its weekly report titled "What to Expect in Q2" that "the outlook for the cryptocurrency market looks bright after mid-April 2024," citing the Bitcoin halving event and the end of the 90-day review period for Bitcoin spot Exchange-Traded Funds (ETFs).

The estimated date for the April halving is approaching in 14 days. According to CoinMarketCap, 2,048 blocks remain until the halving, with an expected block time of 9.93 minutes. Before the halving, Bitcoin miners received 50 BTC as a reward per block. In the first halving in 2012, the mining reward per block decreased from 50 to 25 BTC. Subsequent second and third halvings reduced the reward to 12.5 and 6.25 BTC, respectively. The upcoming fourth halving will reduce the reward to 3.125 BTC. This reduction in rewards is expected to increase scarcity.

The end of the 90-day review period for Bitcoin spot ETFs means there is a high possibility of additional inflows from institutional investors, the report explained. In the U.S., new financial products typically undergo a strict review process by major securities firms before being offered to investors. The review period usually takes at least 90 days. Coinbase noted, "Just as short positions on Bitcoin futures reached record levels, institutional investors still show strong interest in Bitcoin," indicating healthy demand among institutional investors.

According to the cryptocurrency data provider Alternative, the Fear & Greed Index, which measures investor sentiment, stood at 75 (Greed) as of that day. Last week, it also recorded 75 (Greed). Alternative's Fear & Greed Index ranges from 0, indicating extreme fear and pessimism about investing, to 100, indicating strong optimism.