10x Research Recommends Holding Bitcoin Despite Fed's Single Rate Cut Prediction for 2024
Positive Outlook for Bitcoin Amid Lower-than-Expected Inflation
10x Research advises investors to remain invested in Bitcoin, even though the cryptocurrency faces pressure following the Federal Reserve’s recent interest rate projections. According to 10x, Bitcoin tends to rally after softer-than-expected Consumer Price Index (CPI) reports, and they anticipate this trend will continue.
Fed's Latest Decision and Market Reaction
On Wednesday, the U.S. Federal Reserve kept the benchmark interest rate steady between 5.25% and 5.5%, as expected. However, the Fed’s forecast of only one rate cut for 2024, a reduction from the three cuts anticipated in March, rattled the markets. This conservative outlook, coupled with a lower-than-expected CPI release earlier that day, led to a drop in Bitcoin prices.
The leading cryptocurrency by market value fell to $67,400 after the Fed’s announcement, reversing its post-CPI surge to $70,000, based on CoinDesk data.
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10x Research's Bullish Stance on Bitcoin
Despite this setback, 10x Research remains optimistic about Bitcoin’s future. Founder Markus Thielen reiterated their strategy of favoring Bitcoin over other cryptocurrencies like Ethereum. "Our advice remains the same: stick with Bitcoin and avoid others. Historical data shows that lower CPI figures typically boost Bitcoin prices, and we expect this trend to persist," Thielen stated in a note to clients on Thursday.
Inflation and ETF Inflows
The U.S. consumer price inflation rate was flat in May, missing the expected 0.1% rise and down from April's 0.3%. The year-over-year inflation rate was 3.3%, matching expectations and slightly down from April's 3.4%. Thielen noted that declining inflation rates have historically led to significant inflows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs). Data from Farside Investors indicated that these ETFs attracted $100 million on Wednesday, breaking a two-day outflow streak.
Thielen highlighted that ETF inflows stalled after their debut on January 11 when December CPI exceeded expectations, dampening hopes for Fed rate cuts. However, inflows resumed in February, driving Bitcoin prices higher.
Future Expectations
"ETF inflows turned positive at the end of January but began to accelerate slightly ahead of the CPI data release on February 13. When inflation increased again to 3.2% on March 12, Bitcoin ETF inflows halted as the market dismissed the possibility of 2-3 rate cuts," Thielen explained.
Thielen expects the Fed to signal additional rate cuts later this year, believing that inflation has already peaked. This anticipated shift could renew investor confidence in Bitcoin and potentially drive prices higher.
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