(Kitco News) – The cryptocurrency market ended the week on a down note, with Bitcoin (BTC) bulls fighting to hold support at $60,000 despite the latest PCE report giving investors more hope that the Federal Reserve will cut interest rates in September.
It was a similar story for stocks, which trended higher in morning trading, only to limp lower and into the red in the afternoon.
After the core PCE report showed inflation continuing to “cool,” asset prices spiked higher as sentiment around interest rates increased. But “cooling” doesn’t mean a decrease, and investors are growing wise to the fact that the language used by economists belies the fact that inflation is still rising in real terms, as anyone who buys food or pays for energy can attest.
Investors were also digesting last night’s U.S. Presidential debate, with neither candidate coming across as appealing to wide swaths of voters, be it for signs of mental decline or a propensity for straying from the truth. While economists continue to debate about which party will be better for the economy, a large number of voters find themselves unhappy with either choice.
Many were unhappy with either candidate tonight. RFK should have been there. We need more choices.
— David Scacco (@DavidScacco) June 28, 2024
These factors, combined with overall unease about the state of the global economy, debt printing, and geopolitical conflicts, resulted in weakness for financial markets as investors find themselves second-guessing the best way to maintain their wealth.
At the close of markets, the S&P, Dow, and Nasdaq were all lower, down 0.41%, 0.12%, and 0.71%, respectively.
Data provided by TradingView shows that after hitting a high of $62,180 in the early hours on Friday, Bitcoin entered a downtrend, with bulls setting their sights on taking out support at $60,000.
BTC/USD Chart by TradingView
At the time of writing, Bitcoin trades at $60,186, a decrease of 2.06% on the 24-hour chart.
Economic concerns weigh on asset prices
“Data about economic activity in the first quarter of the year suggests slowing momentum, which is fuelling expectations that the Federal Reserve could cut rates this year,” said analysts at Bitfinex in a note shared with Kitco Crypto. “Until then, investors’ appetite for riskier assets such as Bitcoin might fluctuate and translate into uneven flows into ETFs tracking these assets, potentially impacting investor sentiment.”
While many anticipate that Bitcoin could soon see tailwinds from the halving in April, as historical patterns show the start of a bull market 10-12 weeks after rewards for miners are decimated, macroeconomic conditions could potentially limit the upside potential for the broader crypto market as assets deemed to be risky often take a back seat during times of rising geopolitical tensions and economic strife.
Looking ahead to July, increased volatility is expected in both traditional and crypto markets due to regulatory developments and macroeconomic policies, Bitfinex analysts noted.
"Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the first quarter of 2024, according to the ‘third’ estimate released by the Bureau of Economic Analysis,” said Jag Kooner, Head of Derivatives at Bitfinex. “In the fourth quarter of 2023, real GDP increased 3.4 percent. This slowdown suggests potential economic cooling, which could impact investor sentiment.”
“In the context of cryptocurrencies, this may lead to increased interest in Bitcoin and other digital assets as alternative investments, particularly if traditional markets show signs of weakening,” he said. “Historical trends indicate that during economic slowdowns, investors often turn to Bitcoin as a store of value.”
Kooner said that given the rise in economic uncertainty, “flows into spot Bitcoin ETFs might see some fluctuations as investors seek safe-haven assets over risk assets. It remains to be seen if BTC catches a bid based on that. The anticipated resumption of the bull market could further amplify these flows.”
“Historically, during periods of economic downturn or uncertainty, Bitcoin has seen a negative correlation with equities, and shown strength as equities weakened,” he added. “An important consideration is that a resumption of uptrend in crypto bull markets typically starts within 10-12 weeks from the halving; as we move into July and Q3, we get closer to that point with a very important bullish catalyst in the form of the Ethereum ETFs going live.”
As for what to look out for in July, Kooner said, “Market participants should watch for a comeback in volatility in traditional markets and crypto alike as additional regulatory developments and macroeconomic policies will play a crucial role in shaping market dynamics.”
“Investors might anticipate further economic data releases and Fed policy updates, which could influence both traditional and crypto markets,” he said. “Another key point to note is that the Fed Funds futures data suggests that the market is still expecting and pricing in two rate cuts in 2024. The Fed's statements and a possible continuation of a more hawkish stance are important factors to watch.”
Altcoins slide lower into the weekend
The majority of altcoins in the top 200 finished the week in the red amid growing concerns about the health of the global economy.
Daily cryptocurrency market performance. Source: Coin360
Absent from the typical update are double-digit gainers, as the top performer, Akash Network (AKT), only increased by 8% on Friday. Ethereum Name Service (ENS) came in second with an increase of 3.4%, while Aave (AAVE) climbed 3%.
There was a total of six double-digit losers, however, led by a 15.2% decline for Lido DAO (LDO) after the Securities and Exchange Commission filed a lawsuit against the platform, a loss of 15.1% for BinaryX (BNX), and an 11.8% pullback for Mog Coin (MOG).
The overall cryptocurrency market cap now stands at $2.24 trillion, and Bitcoin’s dominance rate is 53%.
