Cryptocurrency prices have wavered this week. Bitcoin has pulled back from this month’s high of over $72,000 to $68,000. Ethereum has found resistance at $4,000 while the total market cap of all cryptocurrencies has remained stuck at $2.6 trillion. Some altcoins like Pepe, Floki, and Bonk have surged hard in the past few weeks. Here are the two bad news that could hurt their performance.
Fed may hold rates higher for longer
The first bad news that will affect cryptocurrencies is the Federal Reserve. Earlier this year, most analysts were expecting the Federal Reserve to deliver six rate cuts this year. Billionaire Bill Ackman was anticipating the first cut to happen in March.
These predictions have not worked out well as the chances of several rate cuts have faded dramatically recently. Inflation, which was falling in 2023 has simply stopped moving downwards and has remained stuck above 3%. The most recent data showed that the headline and core CPI slowed to 3.4% and 3.6%, respectively.
Therefore, most Federal Reserve officials have urged for caution on when rate cuts will start. FOMC members like Raphael Bostic, Mary Daly, and Loretta Mester said the Fed will be data-dependent when determining when rate cuts will start.
The Fed has no real reason to start cutting interest rates right now since the US is in a stagflation period. Economic growth has stalled while inflation has remained above the 2% target. Consumer confidence has rebounded while the labor market is extremely strong.
Therefore, the CME Fed Rate Monitor tool estimates that the bank will deliver one rate cut in its December meeting. A cut before then could lead to the accusations that the Fed is being political since the US will go to an election in November.
Analysts at Goldman Sachs and JP Morgan have even questioned the need for rate cuts this year. Also, there are chances that the Bank of England (BoE) will not cut rates in June since the UK’s inflation is slowing at a slower rate than expected.
News drought ahead
The other bad news is that analysts don’t expect more major good news in the industry. The Securities and Exchange Commission (SEC) already approved 11 Bitcoin ETFs in January. Bitcoin halving, a major event in the industry, has already happened. In most cases, BTC and other altcoins do well ahead of the halving event.
Finally, the SEC has approved Ethereum ETFs, another big event. Therefore, there is no major upcoming news that will drive Ether and other cryptocurrencies higher in the coming months.
Historically, there is a concept known as "buy the rumor, sell the news." This explains why Bitcoin surged ahead of the ETF approval and halving and then moved into a tight range when they happened.
Therefore, the most likely driver for cryptocurrencies like Bonk, Floki, and even the upcoming Pi Coin will be the actions of the Federal Reserve. These tokens will rise if the Fed points to potential rate cuts later this year.
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