Ethereum
Nurses are losing Bitcoin (BTC) and Ether (ETH) as US stagflation fears taking over the market
Crypto markets are in the red amid renewed fears of stagflation in the United States. worst case scenario for risky assets.
Bitcoin (BTC)the leading cryptocurrency by market value, was trading at nearly $62,400 at press time, down 2.5% over 24 hours, according to CoinDesk index data. Ether (ETH) was trading down 3% at $3,200, and the CoinDesk20 (CD20)a measure of the most liquid digital assets, fell 2.6% to 2,197 points.
The market appears to be on the precipice at the moment as it debates which direction to take, with significant bull and bear narratives on the horizon.
As QCP wrote in a note this weekend, the threat of stagflation – a period of high inflation and low growth – is very real.
“Lower than expected [U.S.] The GDP figures indicate a more sluggish economy while the higher Core PCE warns of an inflation problem that continues to be a thorn in the Fed’s side,” QCP wrote.
Last week’s U.S. GDP report showed the world’s largest economy grew annualized rate of 1.6% in the first quarter of this year, following growth of 3.4% in the previous quarter. At the same time, the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation, showed that prices rose at an annualized rate of 3.4% over the first three months of the year, compared to 1.8% in the last quarter of 2023.
The stagflationary combination of a slower growth rate and persistent inflation has further weakened the likelihood of a Fed rate cut.
Most traders on the Polymarket prediction market platform always see no rate cut as the most likely scenario, with a 35% chance of this happening, but the probability of a first rate cut increases, now to 29% compared to 26% a week ago and 14% at the start of the month.
QCP also wrote that Janet Yellen’s fiscal strategy, leveraging the Treasury General Account (TGA) – holding nearly $1 trillion in assets – and the $400 billion reverse repurchase program (RRP) , could inject up to $1.4 trillion in liquidity into the country. financial system causing all risky assets to rise.
As Omkar Godbole of CoinDesk wrote last weekThe key to a continued Bitcoin bull market is the impending announcement of the US Treasury’s quarterly repayment, which maintains or reduces the current TGA balance of $750 billion.
This $750 billion figure in the TGA is critical because it provides a significant signal to financial markets about the U.S. government’s fiscal intentions, which has a profound impact on economic stability and growth.