CoinDesk reports that Bitcoin may have a tough start this month as traders aim to predict the economic activities in the United States amid sustained inflation and a stock market rally driven by large tech companies.
According to the third estimate released by the US Bureau of Economic Analysis, the real Gross Domestic Product (GDP) of the United States surged to an annual growth rate of 1.4% in the first quarter of 2024.
The data from Thursday sharply contrasts the figures from the fourth quarter of last year, which showed a growth in US economic activity of 3.4%.
The bureau’s data also indicates that the Personal Consumption Expenditures Index for May (a key inflation indicator) has dropped from 2.7% in April to a year-on-year growth of 2.6%.
Jag Kooner, the derivatives chief at Bitfinex, told Decrypt: “This slowdown suggests that the economy may cool off.” “Looking ahead to July, market participants should watch for increased volatility, as additional regulatory developments and macroeconomic policies will play a crucial role.”
Kooner added that with signs of weakness in traditional markets, interest in Bitcoin and other digital assets may increase as alternative investments.
The economic slowdown could also prompt the Federal Reserve to start cutting spending this year. The Fed has maintained high interest rates to manage price stability and prevent the economy from overheating.
Analysts suggest that lower lending rates might flow into risk assets, including Bitcoin.
Kooner stated: “Historical trends show that during economic slowdowns, investors often view Bitcoin as a store of value.”
Further clues about Federal Reserve policy are expected to be revealed at the next Federal Open Market Committee meeting scheduled for July 30th to 31st. Meanwhile, futures traders are pricing in two rate cuts, expected in the final quarter of this year.
While some anticipate increased volatility in July, others remain skeptical.
Pratik Kala, Senior Digital Asset Investment Analyst at cryptocurrency fund manager DigitalX, told Decrypt: “July will be a period of consolidation and low volatility. Bitcoin is looking for the next catalyst for an upward move.” “It’s not there yet, but this is expected to change as the US election approaches.”
Seasonality is also crucial. Kala added that the third quarter is seen as a period of low volatility, as most key decision-makers in the US typically take vacations.
CoinGecko data shows that late on Sunday, the world’s largest cryptocurrency surged to its highest point in a week, nearing $63,700. Bitcoin has dropped 14% from its historical high near $73,800 in March.
