Key Takeaways:
Bitcoin’s price has dropped below $70,000 as a bag of mixed macroeconomic scenarios are playing their game – rising unemployment numbers in the US and rate cuts by global central banks. This week, the world’s largest cryptocurrency by market capitalization had been aiming to rally past the $72,000 mark, targeting a new all-time high.
Bitcoin Rallies to $71,000 After Central Banks of Canada, Denmark, and EU Announce Rate Cuts
BTC began Thursday’s session on a high note and rallied to $71,700 after several central banks announced rate cuts.
The European Central Bank (ECB) is lowering its benchmark lending rate on the euro from 4% to 3.75%, its first reduction in five years. Denmark’s National Banken matched its EU counterpart by cutting its benchmark interest rate by 25 basis points from 3.6% to 3.35% to defend its peg to the common currency.
Earlier this week, the Bank of Canada announced its first rate cut in four years, bringing the figure down from 5% to 4.75%. These moves are being carried out as inflation rates have started to slow down globally, hitting their lowest in four years since the pandemic.
The central banks’ policy direction to loosen the grip on their respective economies alongside the positive institutional inflow into the spot BTC exchange-traded funds (ETFs) being traded in the US has been a major boost for Bitcoin’s short-term price trajectory. This week alone, the spot Bitcoin ETFs have recorded over $1.54 billion in net inflows.
The US Adds 272,000 Jobs in May, But Unemployment Rate Soars to 4%
However, the positive momentum didn’t last long as the Bureau of Labor Statistics revealed a dual-edged economic scenario in the United States. There was an increase in job creation but a 4% rise in unemployment. Job growth indicated strength but the uptick in unemployment hinted at deeper economic issues.
The US added a total of 272,000 jobs last month.
There was a 0.4% rise in average hourly earnings in May, a 4.1% year-over-year increase. However, the rate of aggregate weekly payroll growth in the private sector decreased compared to the previous year.
This complicated scenario led to liquid assets like Bitcoin (BTC) losing value. According to CoinGecko, BTC was trading at $69,159 on Friday evening following the release of the report.
Prominent market analyst Skew pointed out that spot selling activity on two of the world’s largest crypto exchanges – Binance and Coinbase – had increased, and there was a simultaneous build-up of short perpetual futures positions on derivatives markets that were weighing on Bitcoin’s price.
Federal Reserve is Expected to Cut Dollar Interest Rates, Which Could Propel BTC to New ATH
The question on everyone’s mind is whether the US Federal Reserve might join its global counterparts in the rate-cutting trend. Experts and some members of the central bank have suggested that any change to US monetary policy could only happen in 2025 as recent data has shown a softening in both inflation and economic growth.
The Fed was expected to announce a rate cut in June, but the latest jobs report has cast a shadow over that decision. Citi Bank economist Andrew Hollenhorst predicts the Federal Reserve to cut rates in September, November, and December. Meanwhile, JPMorgan economist Michael Feroli projects a rate cut in November.
Next week the highly anticipated inflation data will be released. Analysts predict that the Consumer Price Index (CPI) numbers could potentially trigger a new all-time high for Bitcoin due to the market pricing in the rate cuts.
The CPI numbers could help clarify whether the economy is going through a moment of decelerating inflation combined with resilient employment or inflationary pressures still persist.
Despite the apex cryptocurrency struggling to get past the $72,000 level, analysts are calling an imminent break upwards to new record highs as macro conditions are turning in favor of risk assets.
Bitcoin Could Target a New All-Time High in the Coming Weeks
Standard Chartered Bank’s forex and digital assets research lead Geoffrey Kendrick has set a $150,000 target for BTC by the end of the year. In a report released on Thursday, he also noted the possibility of a breakout to new all-time highs in the next few days.
The broader cryptocurrency market also experienced a pullback. Decentralized exchange Uniswap’s native UNI token, oracle network Chainlink’s LINK, and Layer-1 blockchain Near Protocol’s NEAR declined between 3% and 5% yesterday.
Cosmos-based gaming network Injective’s INJ token defied the broader market trend to project a 5% gain. This was after an update to the project’s tokenomics that will seemingly make the asset more deflationary by reducing its supply through token burns.
At the time of writing, Bitcoin (BTC) is trading at $69,295 – down 2.8% over the last 24 hours.
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