CoinDesk reports:
The meeting minutes released on Wednesday showed that in June, the Federal Reserve in the United States indicated signs of easing inflation, although it remains above the 2% target range.
Economic activity in the United States continues to expand at a steady pace, albeit with the growth in real GDP this year expected to be lower than the robust pace seen in 2023.
A decline in inflation is seen as favorable for risk assets, including Bitcoin, as it would instill confidence in the Fed to start lowering interest rates this year, effectively reducing borrowing costs.
In the short term, cryptocurrency prices may continue to feel pressure from the high inflation environment.
Jonathan de Wet, Chief Investment Officer of digital asset trading firm Zerocap, told Decrypt that following the frenzy of trading exchange-traded funds earlier this year, the spot price performance of the leading asset Bitcoin seems to have “lost momentum.”
De Wet stated, “The Federal Open Market Committee meeting minutes released after the close did not help the already fragile market sentiment, with dissenting Fed officials noting a cooling U.S. economy. Some participants indicated that if inflation persists at higher levels or continues to rise further, there may be a need to raise fund rates.”
The Fed mentioned that despite the labor market remaining strong with ongoing job gains, there are indications that the tightness in the labor market conditions is easing.
If the trend remains stable, this will provide additional ammunition for central bank to lower interest rates in the coming months.
Indicators such as a decrease in job vacancy rates and declining hiring rates suggest a reduction in the tightness of the labor market.
The Federal Reserve decided last month to maintain the target range for the federal funds rate at 5.25% to 5.50%, largely in line with market expectations.
According to the FedWatch Tool from the Chicago Mercantile Exchange, futures traders expect two rate cuts this year. This will largely depend on the U.S. central bank easing monetary policy.
The meeting minutes revealed that in June, Federal Reserve members discussed various risks, including potential downside risks to economic activity, as well as the possibility of continued rising inflation due to geopolitical developments and trade tensions.
The European Central Bank and the Bank of Canada have already initiated rate-cutting cycles, with most central banks in advanced economies expected to begin loosening policies in the coming months.
On Wednesday, Bitcoin prices took a hit, falling to the lowest point in two months, dropping below $58,000 USD. CoinGlass data indicates that liquidity in the cryptocurrency market is also beginning to accumulate, reaching as high as $240 million USD at the time of writing.
De Wet said, “In our view, if we break it down further, the price of a fast elevator will drop to $52,000 USD.”