Bitcoin Rebounds to $64,000, Fed Rate Hike Expectations Plummet?
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Bitcoin Rebounds to $64,000, Fed Rate Hike Expectations Plummet?
Following Fed Chair Waller's remarks, Bitcoin sees a glimmer of policy easing.
Navigating Web3 tides with focused insightsWritten by: Forbes
Compiled by: AididiaoJP, Foresight News
Bitcoin rebounded strongly from recent lows this week, with prices returning above $60,000. Previously, after U.S. President Trump returned to the White House, Bitcoin had fallen to lows unseen in years, with the market even warning that the "Ponzi scheme" might face a collapse.
Since the beginning of this year, Bitcoin has performed poorly, with prices more than halving from the highs at the start of the year. Although the world's largest asset management firm, BlackRock, is quietly positioning for the next phase of the Bitcoin and cryptocurrency revolution, the latest U.S. economic data has sent unfavorable signals to the crypto market.
Just as some cryptocurrencies were predicted to surge 50 times and create "generational wealth," the U.S. June employment report was released, falling far short of expectations.
The report showed that the U.S. economy added only 57,000 jobs last month, significantly lower than the 115,000 expected by economists surveyed by Dow Jones. However, the unemployment rate fell from an expected 4.3% to 4.2%. Nic Puckrin, founder of Coin Bureau and former Goldman Sachs analyst, analyzed in an email: "Superficial data makes the labor market look impregnable, but actual job additions are far below expectations, and the labor force participation rate dropped by 0.3 percentage points. This may be simply because many people have given up looking for jobs, making the data look not so bad."
For the new Federal Reserve, whose primary task is to curb inflation, wage growth data is more critical than overall employment figures. Average hourly earnings accelerated year-on-year to 3.5%, which is bad news for those expecting a policy shift towards easing. Strong wage growth will continue to fuel the monster of inflation—this is exactly what Federal Reserve Chair Kevin Warsh is most worried about. As long as wage increases remain high, expectations of interest rate hikes in 2026 will be difficult to eliminate.
After the employment report was released, Bitcoin prices continued to rebound, briefly touching $63,000. Traders are now turning their attention to the July Consumer Price Index (CPI) data to judge how the Federal Reserve under new Chair Warsh will adjust interest rate policy.
Bitfinex exchange analysts pointed out: "The June CPI data released on July 14 will become a key turning point. May inflation rate was as high as 4.2%, while the market expects the Federal Reserve to maintain interest rates in the 3.5%-3.75% range at the July 28-29 meeting. Warsh's previously dovish remarks have brought some relief to risk assets."
A team led by ING analyst James Knightley wrote in a report that July CPI is expected to show a month-on-month decline in overall prices, mainly thanks to a plummet in gasoline prices. "This may further drive market expectations that the Federal Reserve will maintain interest rates unchanged for a long time this year, rather than raising them."
In recent weeks, oil prices have fallen sharply, falling back to levels before the outbreak of the U.S.-Iran war. Traders believe that an oversupply of oil helps alleviate inflationary pressures and prompts the Federal Reserve to lower borrowing costs. David Morrison, senior market analyst at Trade Nation, stated: "Bitcoin continues to rebound; lower borrowing costs often improve liquidity, supporting risk-sensitive assets such as Bitcoin."
Morrison added: "Weak employment data has alleviated market concerns about multiple interest rate hikes by the Federal Reserve within the year, leading to a weaker U.S. dollar, a general rise in risk assets, and improved Bitcoin market sentiment."
However, some also believe this employment report is not bad news for Bitcoin. Some investors are betting that the Federal Reserve will shift towards easing in the second half of the year, supporting the U.S. dollar "debasement" trade, including gold and Bitcoin. Stephen Coltman, Head of Macro at 21Shares, stated: "The market originally expected strong employment data, but the results fell significantly short of expectations, accompanied by significant downward revisions of previous data. The pricing of additional tightening policies by the Federal Reserve this year has become increasingly unreasonable. Inflation expectations have fallen significantly, and current policy is becoming increasingly restrictive. This paves the way for a policy shift towards easing in the second half of the year, constituting a positive for 'debasement' trades such as precious metals and cryptocurrencies that were dragged down by the Federal Reserve's hawkish stance this year."
Current market pricing shows the Federal Reserve may only raise interest rates once this year (25 basis points), but Warsh's remarks at the global central bank governors meeting this week have led investors to reduce their bets on monetary tightening.
Warsh stated at the annual meeting of international policymakers and economists hosted by the European Central Bank in Portugal: "Inflation expectations for the first four weeks of this period have declined, and inflation risks are decreasing." He did not explicitly state whether interest rates would be raised at the next meeting at the end of July; the market currently believes the probability of maintaining interest rates unchanged is 82%.
Looking ahead, Bitcoin prices will remain highly sensitive to upcoming U.S. economic data, especially employment, inflation reports, and Federal Reserve policy expectations. Simon-Peter Massabni, Head of Business Development at XS.com, pointed out: "If economic data continues to show resilience, expectations for rate cuts will weaken, and a stronger U.S. dollar will bring additional pressure to cryptocurrencies. Conversely, if data points to a significant slowdown, expectations for monetary easing return, and Bitcoin will have the opportunity to recover some lost ground. In my view, the relationship between Federal Reserve policy and Bitcoin has never been as important as it is today."
Massabni believes that the three core variables determining Bitcoin's trend in the coming months are: institutional ETF fund flows, geopolitical developments, and Federal Reserve interest rate expectations. "If these factors gradually improve, the current sell-off may ultimately be viewed as a long-term buying opportunity rather than the beginning of a bear market. Conversely, if pressures remain unresolved, high volatility will continue until the market finds a solid price bottom."
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