According to PANews, CoinShares released a report last weekend stating that the factors influencing Bitcoin's price are no longer narratives about interest rates, as was the case when the spot Bitcoin ETF was approved in the United States in January this year. Since then, with the reduction of ETF flows, Bitcoin's price has realigned with market expectations of interest rates. The Federal Reserve faces a challenging dilemma: it needs to control ongoing inflation while supporting the sluggish U.S. economy. In the long run, this predicament could be beneficial for Bitcoin.
Over the past week, market trends have been primarily influenced by macroeconomic factors. The research points out that consistency with June's interest rate expectations has strengthened, similar to the trend in 2023. Last week's GDP growth was lower than expected, while core PCE inflation data was much higher than anticipated, exacerbating stagflation concerns. Stagnant service sector growth and high price payments indicate significant price pressure. The Federal Reserve maintained a hawkish stance at its Wednesday meeting, causing a sharp drop in Bitcoin prices. However, the Federal Reserve's quantitative tightening (QT) announced in June was reduced to $25 billion, exceeding market expectations and highlighting its policy dilemma. The market expects the Federal Reserve to cut interest rates later this year to address the weak job market.
The recent price drop has led to an outflow of funds from the U.S. spot Bitcoin ETF, with the average investment in the U.S. spot Bitcoin ETF being about $62,000. The market seems to be overreacting to short-term economic data, overlooking long-term sluggish growth and government debt issues. Given that the supply of Bitcoin is fixed, the Federal Reserve's interest rate cut (which may be larger and later than expected) will support Bitcoin prices. The market needs to focus on long-term trends and avoid being confused by short-term fluctuations.