Something happened yesterday on the Bitcoin market that allows us to make positive predictions on its price for the coming weeks. The forecast has also turned positive with regards to the Fed’s monetary policy.
The question of inflation
In fact, yesterday the data relating to inflation in April in the USA were released.
The data turned out to be decidedly positive, although in line with forecasts.
The general annual inflation rate fell from 3.5% to 3.4%, after having increased for two months. However, the current level is still significantly higher than the 3% of June 2023.
But what the financial markets are most interested in is the annual core inflation rate, i.e. without food and energy products, because it turns out to be much less volatile and much more representative of the general trend.
The fact is that the core inflation rate has started to fall again.
This, unlike the general one, has never risen since May last year, even if its decline from 5.3% a year ago marked three setbacks. The first in November 2023, when it stopped at 4% of the previous month, and the second in January 2024, when it stopped at 3.9% of the previous month.
Even in March it had stopped at the 3.8% of February, so that for six consecutive months it had only fallen by 0.3 percentage points at a rate of 0.1 percentage point every two months.
Yesterday this trend stopped, because the decline was 0.2 percentage points in just one month. Practically from November 2023 to March 2024 it decreased by 0.2 percentage points in 4 months, while in April it took just one month to drop by another 0.2 percentage points.
The Fed’s monetary policy and Bitcoin price predictions
From November onwards, the chances that the Fed could start cutting interest rates slowly diminished.
They have been fixed at 5.5% since July last year, and although the markets were convinced that it could start cutting them as early as March, up to now the Fed has not yet done so.
At this moment the markets are absolutely convinced that the Fed will not cut them even in June, while there is starting to be some vague greater probability that it could cut them as early as July.
However, most analysts maintain that there is not much chance of a cut before September, even if in light of yesterday’s data the chances of a first cut as early as September have increased significantly.
It should not be forgotten that there are elections in the USA on November 5th, and September 18th could be the only real opportunity for the Fed to cut rates before the elections, thus favoring the government in office.
However, it must be remembered that the President of the Fed, Jerome Powell, was appointed by the Republican Donald Trump in 2018, although in recent years he has governed in apparent harmony with the Democratic government of Joe Biden.
One thing that the Fed has already announced is the easing of the QT starting from June.
The price of Bitcoin
Yesterday the US stock markets reacted very well to the inflation data, even if it turned out to be in perfect harmony with the forecasts.
That -0.2% in just one month for core inflation has however created a bit of optimism, so much so that for example the S&P500 index has jumped by 1.1%, which is no small feat for the stock markets traditional.
It should be noted that yesterday’s jump marked the new annual high of 2024, which is also the new high ever.
One could also describe this situation as slightly euphoric, so much so that Bitcoin also reacted very well.
The price of BTC is still 11% below its March all-time highs, but is clearly recovering from $57,000 on May 2.
Yesterday it made a small jump of 7% which brought it back to the levels of April 24, four days after the halving.
Fed and Bitcoin price predictions
According to Bitfinex analysts, investors may have interpreted yesterday’s inflation data as the start of a change in trend.
The idea is that interest in risk-on may return, as demonstrated by the new highs of the S&P500, triggering a new bullish trend.
Bitfinex analysts point out that yesterday the price of Bitcoin made an immediate jump of around +2.5% immediately after the inflation news, even though the data released was perfectly in line with expectations.
To this it must be added that the Fed has announced its intention to reduce quantitative tightening starting from June, and all this is considered favorable for risk-on assets.
However, analysts point out that inflation is still above 3%, and that the PPI inflation data showed a third consecutive monthly increase the day before yesterday. For this reason, they do not assume that the Fed is already considering the current scenario suitable for it to start cutting rates.
So it seems that once again financial markets have tried to anticipate the change in trend, which however may not yet have fully occurred, and this theoretically makes it possible for the situation to be reversed in the event of negative unforeseen events.
However, if there were no negative unforeseen events, yesterday could have seen the beginning of the change in trend that has been expected for weeks now.
