Key Points
- Bitcoin’s recovery halted at $98K and dropped to $95K following Jerome Powell’s outlook on interest rate cuts.
- The overall demand for Bitcoin has decreased due to macro uncertainty.
Bitcoin’s [BTC] recovery early in the week was stalled at $98K and then fell to $95K. This happened following Jerome Powell, the Federal Reserve Chair’s, hawkish outlook on interest rate cuts.
Powell, during his semi-annual monetary report to the U.S Congress on February 12, reinforced that the agency was not in a rush to change its policy stance. He stated, “Our policy stance is now less restrictively than it had been, and the economy remains strong. We do not need to be in a hurry to adjust our policy stance.”
The Impact of Lower Interest Rates
Lower interest rates mean cheaper capital, which is bullish for risk-on assets like Bitcoin and stocks. However, the slow Fed rate cut outlook and Trump’s tariffs have increased bearish sentiment following a hawkish hold in the last month’s FOMC meeting.
The U.S. labor markets and inflation status determine the Fed rate cuts. Therefore, the markets will shift focus to the key inflation data, the January CPI (Consumer Price Index) report scheduled for February 12.
January CPI Report’s Impact on BTC
If the actual CPI is higher than the forecasted target for monthly change for the last month’s CPI of 0.3%, it would be considered bearish. This is because it would prompt the Fed to maintain the interest rate unchanged for a longer period. However, a lower CPI print could slightly boost the market and the odds of a rate cut.
The headline risk has kept the overall demand muted, as per the Coinbase Premium Index. The index tracks U.S. investors’ appetite for BTC and positively correlates with BTC price action.
BTC retraced from $101K to $95K over the same period after a surge in early February. The indicator has returned to a neutral level. The Coinbase Premium Index could limit BTC’s short-term rebound if there is any further dip into negative territory.
The cryptocurrency’s choppy market could persist according to the Coinglass liquidation heatmap. This means that BTC could continue fluctuating between $94K and $100K in the short term.
