The latest US economic data points to a clear slowdown in the economy, but without signaling a recession. Employment growth and consumption are losing momentum, while inflation continues to fall. Crucially, monetary policy remains restrictive despite initial interest rate cuts, which increases the Federal Reserve's room for maneuver for further easing. Historically, Bitcoin has reacted particularly sensitively to such phases, as falling real interest rates and an improving liquidity situation increase the attractiveness of scarce digital assets.
In the short term, however, the environment remains characterized by uncertainty. On-chain data shows renewed selling by large #bitcoin-investors, while capital flows into $BTC (-2,16%) -ETPs have recently been mixed. This combination suggests that the markets remain susceptible to volatility. At the same time, the macroeconomic fundamentals are gradually improving: If the trend towards more moderate growth and falling inflation continues, this could have a stabilizing effect on the bitcoin price in the medium term, as developments are increasingly determined by liquidity and real interest rates.
(Text: James Butterfill, CoinShares' Head of Research)
