KEY POINTS:
- Bitcoin retreats to $67,000.
- Inflation-fueled gains fade.
- Fed projects one rate cut.
Prices spiked to $70,000 but then reversed course and erased whatever advance was made on the day after Fed event.
- Bitcoin prices BTCUSD staged a sharp reversal Thursday morning, following a data-packed Wednesday. The orange coin spiked more than 5% yesterday, adding some $3,000 to its price to float near the $70,000 mark. Supporting the bullish narrative, consumer prices in US moderated to a 3.3% growth in May — lower than the 3.4% expected by economists and below the 3.4% logged in April.
- It was all fine and dandy before the Federal Reserve showed up and ruined the party, hitting Bitcoin with a 4% decline to $67,000. America’s central bank, responsible for setting interest rates in efforts to maintain price stability and stable employment, held rates steady at 5.50%. That was expected and already baked into prices. What tripped markets was the Fed’s forward-looking guidance with just one rate cut, down from three.
- Higher rates are generally unfavorable to risk assets such as Bitcoin and the cryptocurrency market because they make borrowing more expensive and restrict the money supply in the system. To this end, the prospects of higher-for-longer rates might keep a lid on optimism until investors either get used to it or that lid gets lifted by the first rate cut, now expected in December.