Bitcoin’s relationship with the stock market, particularly Big Tech, took a surprising turn in June. Following the release of a softer-than-expected Consumer Price Index (CPI) report, both asset classes experienced a sudden dip.
CPI Cools, But Bitcoin Chills
The June CPI data, at 3.0%, signaled a slight easing of inflation compared to May’s 3.3%. While this could pave the way for a potential Fed rate cut in September, traditionally positive for risk assets like Bitcoin, the initial reaction painted a different picture.
Bitcoin, mirroring Big Tech stocks, dropped below the psychologically important $58,000 level after the CPI data. Analysts point to investors rotating out of Big Tech and into small-cap stocks, a move that often coincides with a Bitcoin slump.
Small Caps: Bitcoin’s Unexpected Ally?
Quinn Thompson, founder of crypto hedge fund Lekker Capital, offers an interesting perspective. He suggests that the outperformance of small-cap stocks, traditionally seen as riskier assets, could actually benefit Bitcoin’s recovery. Historically, such trends have correlated with Bitcoin strength.
Fed Pivot and German Sell-Off: A Balancing Act
The odds of a September Fed rate cut, fueled by the softer CPI, currently stand above 80%. This easing of monetary policy could be a boon for Bitcoin. However, concerns linger regarding the potential dampening effect of Bitcoin’s supply overhang, particularly from the ongoing German government sell-off.
However, there’s a silver lining. As of July 12th, German holdings have dwindled significantly, dropping below 10,000 BTC from a peak of 50,000 in mid-June. This suggests that the supply pressure from this source could be largely mitigated by next week.
What’s Next for Bitcoin?
Analysts at QCP Capital, factoring in the easing supply pressure, the upcoming Ethereum ETF launch, and the softer CPI data, believe Bitcoin is poised to break free from its current sideways movement. While renowned analyst Stockmoney Lizards predicts a potential retest of the $50,000-$52,000 range before a climb towards the $64,000 target, only time will tell how Bitcoin navigates this complex interplay of factors.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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