(Kitco News) – Bitcoin’s (BTC) price spiked higher in early trading on Thursday as traders brushed aside concerns related to interest rates and the future of rate cuts to dive back into the market. The move higher comes as the U.S. 10-year Treasury yield and DXY sold off after surging higher and exerting pressure across markets on Wednesday.
The latest data from The Bureau of Economic Analysis showed the U.S. economy grew at a slower pace than initially thought during the first quarter, increasing at an annualized pace of 1.3% during the period, down from a first reading of 1.6% growth in April.
This likely influenced the Treasuries and DXY markets as the weaker-than-anticipated reading could boost the chances of an interest rate cut coming sooner rather than later. The CME FedWatch Tool shows market expectations for a cut in September have increased from 47% to 53% over the past 24 hours.
Crypto watchers saw it as a positive development for the ecosystem as evidenced by the spike higher for Bitcoin after the data was announced. But traders are also looking for any news that can breathe some life back into the crypto market as it has been trading sideways and stagnant for more than 42 days in what market analyst CryptoCon called a “low volatility/boredom zone.”
Providing additional perspective, CryptoCon added, “This is only half the time we saw in August - October 2023 which was one of the least volatile periods in Bitcoin's history.”
“Noticeably, boredom periods are much shorter than excitement/expansion,” CryptoCon said. “These times of low volatility are crucial to build support for the next leg up. The next green box is loading…”
Bitcoin analyst Willy Woo agreed with this assessment, tweeting, “This 2.5 months of consolidation under bullish demand has been very good for #Bitcoin, it means price has more room to run before topping out.”
As for when to start worrying about a market top, Woo said the Bitcoin Macro Oscillator (BMO) has moved down one level, and “now has 2-3 levels to climb before a macro market top.”
“Back in February, Bitcoin surged almost 50 percent in value in a single month,” said Neil Roarty, analyst at Stocklytics, in a note to Kitco Crypto. “Since then, both bulls and bears have been frustrated by three months of relative stability. This consolidation in the $60,000 - $70,000 price range places Bitcoin in a strong position, but it does raise questions around what it will take to break one way or the other.”
“Bitcoin was once seen as a hedge against broader economic headwinds,” he added. “But as institutional investors continue to show greater interest in cryptocurrencies, we must increasingly look towards traditional indicators for clues as to what happens next.”
“The answer could well lie in interest rates. The U.S. Federal Reserve continues to hint at rate cuts, but so far has been reluctant to pull the trigger,” Roarty noted. “We’re unlikely to see any this summer, and there are even some whispers they may not come until 2025.”
“Combined with strong treasury yields and solid economic growth, high-risk assets like Bitcoin lose a little of their appeal,” he concluded. “Until the interest rate cuts finally arrive, the waiting game looks set to continue.”
Analysis from Timothy Peterson, founder of Cane Island Alternative Advisors, also pointed to the possibility of continued weakness over the next six months, with a chance that Bitcoin could fall into the low $50,000 range.
This is #Bitcoin Price to Metcalfe Value. When the ratio is >100% it has *always* predicted a bear market of -20% or more. This week it hit 102%. There is a 2/3 chance of a -20% decline in 6 months.
You can interact with this chart at https://t.co/vYlO5SWqQb pic.twitter.com/syVwgDECZ0— Timothy Peterson (@nsquaredvalue) May 29, 2024
“This valuation is in the disturbing bottom 6% of historical outcomes (since 2015),” Peterson said in a follow-up tweet. “Odds are high that #Bitcoin will drop to the low 50s sometime in the next 180 days.”
At the time of writing, Bitcoin trades at $68,400, an increase of 1.05% on the 24-hour chart.
BTC/USD Chart by TradingView
