While investors were hoping for a breath of fresh air from the Federal Reserve's possible interest rate cut, Bitcoin continues to fall, raising serious concerns about the future of cryptocurrencies. Despite falling inflation and encouraging economic indicators, markets remain unstable, and geopolitical tensions are not helping matters. Why does Bitcoin not react positively to these economic signals? Are recovery prospects threatened by unpredictable global events? In this article, we dissect the reasons behind this complex situation and the challenges for investors in the weeks to come.
Inflation slows, but uncertainties persist
The latest report from the Bureau of Labor Statistics shows the Consumer Price Index (CPI) increased 2.4% in September, slightly above forecasts of 2.3% but down from 2 .5% of August. This downward trend in inflation is confirmed after months of sustained increases, where the rate peaked at 9.1% in June 2022. According to 21Shares, this trajectory could favor a reduction in interest rates by the Fed. Thus, the US employment report, which shows a drop in the unemployment rate from 4.2% to 4.1%, reinforces this hypothesis, with an 80% probability of a 25 point reduction in unemployment. basis in the coming weeks.
Lower interest rates have historically had a favorable impact on Bitcoin, as explained by Leena ElDeeb, analyst at 21Shares. “A reduction in rates tends to have a favorable impact on Bitcoin by lowering borrowing costs,” she said. declared. This encourages investors to turn to riskier assets, such as cryptos. Indeed, despite these encouraging indicators, Bitcoin continues to record a decline of 1.01% and is currently trading around $60,138. Geopolitical tensions and financial market instability are dampening hopes of an immediate recovery for crypto investors.
Geopolitical tensions that blur perspectives
Despite expectations of lower interest rates, prospects for a crypto market recovery are clouded by current geopolitical tensions. International events, from instability in Eastern Europe to war in the Middle East, have amplified global economic uncertainty, limiting investor enthusiasm. While the Fed faces conflicting data (falling inflation, but a US economy with mixed signals), cryptos, particularly Bitcoin, remain sensitive to fluctuations in policies and external events.
In addition, 21Shares analysts note that the volatility of traditional markets and the current ups and downs of technology stocks reinforce this caution. This highlights a key dilemma for investors, torn between expectations of more accommodative monetary policy and fears that international crises will still dominate markets for the rest of the year.
While US economic signals appear to indicate a shift towards looser monetary policies, cryptos, and more specifically Bitcoin, remain vulnerable to geopolitical turbulence. Investors should keep these complex variables in mind before making decisions. While a drop in interest rates could well trigger a recovery, it is clear that global volatility could continue to weigh heavily on crypto markets in the months to come.
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