The meeting minutes released on Wednesday showed that in June, the Federal Reserve of the United States indicated that inflation had shown signs of easing, but it remained above the 2% target range.
The US economic activity continued to expand at a steady pace, although the actual GDP growth for this year is expected to be lower than the strong pace in 2023.
A decrease in inflation would be favorable for risk assets including Bitcoin, as it would give the Federal Reserve confidence to start lowering interest rates this year, effectively reducing borrowing costs.
In the short term, cryptocurrency prices may continue to feel the pressure brought by the high inflation environment.
Jonathan de Wet, Chief Investment Officer of digital asset trading company Zerocap, told Decrypt that after the frenzy of trading exchange-traded funds this year, the spot price trend of the leading asset Bitcoin seems to have “lost momentum”.
De Wet said, “The minutes of the Federal Open Market Committee released after the close did not help the already fragile market sentiment, with dissenting Fed officials pointing out that the US economy is cooling down, and some participants indicating that if inflation continues to remain at high levels or rise further, it may be necessary to raise the fund rate.”
The Fed stated that although the labor market remains strong and employment continues to increase, there are signs that the tightness of the labor market conditions has eased.
If the trend remains stable, this will provide additional ammunition for the central bank to lower interest rates in the coming months.
Indicators such as declining job vacancy rates and recruitment rates suggest that the tightness of the labor market has decreased.
The Fed decided last month to maintain the target range of the federal funds rate at 5.25% to 5.50%, largely in line with market expectations.
According to the FedWatch Tool of the Chicago Mercantile Exchange, futures traders expect two rate cuts this year, which will largely depend on the US central bank’s monetary policy easing.
The meeting minutes showed that in June, Fed members discussed various risks, including the potential downside risks to economic activity, and the possibility of sustained inflation due to geopolitical developments and trade tensions.
The European Central Bank and the Bank of Canada have already started a rate-cutting cycle, and it is expected that most central banks of developed economies will begin to loosen their policies in the coming months.
On Wednesday, the price of Bitcoin was hit, falling to its lowest level in two months, dropping below $58,000. CoinGlass data shows that the liquidation in the cryptocurrency market has also begun to pile up, reaching $240 million at the time of writing this article.
De Wet said, “In our view, if we further break it down, the price of the fast elevator will drop to $52,000.”
