Bitcoin (BTC) Price Stagnates Below $58K Despite Favorable Macroeconomic Environment

The United States Consumer Price Index (CPI) rose by 3% year-over-year in June, slightly below the market consensus of 3.1%. Analysts claim that this CPI release was bullish for Bitcoin, but traders are questioning why its price remains below $58,000. Three factors could possibly explain investors’ lack of enthusiasm.

The United States Consumer Price Index (CPI) rose by 3% year-over-year in June, which is slightly lower than the market consensus of 3.1%. According to some analysts, this CPI release was bullish for Bitcoin ( BTC ), but traders are left wondering why its price remains below $58,000. Three factors could explain investors’ lack of enthusiasm.

According to trader, YouTuber and analyst Daan Crypto, Bitcoin’s weakness could be attributed to scalpers and market makers trying to liquidate leveraged longs. However, the trend favors “continuation higher,” which suggests that BTC should bounce back to $60,000 in the near term. Essentially, if the U.S. central bank cuts interest rates, then the incentive for fixed-income investments will be reduced, leading some of this money to seek higher returns elsewhere.

Stocks and gold rallied while Bitcoin price stagnated

Chris Larkin, managing director of trading and investing at E-Trade, told CNBC that the Federal Reserve is “one step closer to a September rate cut,” especially after real average hourly earnings for workers slowed 3.9% from the prior year, according to a Bureau of Labor Statistics report. Additionally, the labor force participation rate increased slightly to 62.6% in June from 62.5% in May. According to CNN, slowing wages are a strong incentive for the Fed to begin cutting interest rates.

According to the CME Group’s FedWatch tracker of interest rate futures contracts, traders are now pricing in a 47% chance of two interest rate cuts in 2024, up from 24% the prior week. Furthermore, Yahoo Finance stated that Fed Chair Jerome Powell is paying closer attention to the employment rate, adding that the central bank “is increasingly aware of the risks posed by a cooling labor market.”

Despite data pointing to higher odds of rate cuts, with consensus suggesting at least one 0.25% rate cut by September, Bitcoin's price remains pegged below $60,000. Meanwhile, the S&P 500 stock market index is 0.5% below its all-time high, and gold, the market’s preferred store of value, is trading 1.2% below its $2,450 record high from May 2024. Even the Russell 2000 small cap index, which excludes the 1,000 largest U.S.-listed companies, rose 3% on July 11.

Given the constructive view of traditional finance, investors are struggling to find explanations for Bitcoin’s lack of bullishness. This decoupling is especially worrisome considering that spot Bitcoin exchange-traded funds (ETFs) have captured $800 million in inflows over the past four trading days, according to data from Farside Investors.

To make matters worse, the U.S. Dollar Index, which measures the greenback against a basket of foreign currencies, dropped to its lowest level in five weeks at 104.4. This suggests that investors are not seeking shelter in cash positions, which could partially explain Bitcoin’s bearishness.

German government BTC sale, miner’s profitability and fear of recessionBitcoin's underperformance can be attributed to three factors. The first is the fear, uncertainty and doubt, or FUD, that is being generated by the German government's ongoing sale of Bitcoin. Nearly 50,000 BTC, which were originally seized from a pirated movie website in 2013, are being sold off by authorities, either being sent to exchanges or known market makers. According to Arkham Intelligence, less than 5,000 BTC now remain for sale.

Another source of uncertainty stems from Bitcoin miners. The 50% cut in block subsidies from April’s halving is forcing some miners to sell their holdings. According to a CryptoQuant report, “Large-size miners have sold about $300 million since June 20, while mid-size miners have unloaded around $500 million on a cost basis.”

Lastly, traders fear that the weakness in real estate markets, especially in China, will deter global economic growth. If corporate earnings disappoint in the second half of 2024, investors will likely seek protection in cash positions, which is detrimental for risk-on assets like Bitcoin. These combined factors explain why BTC has failed to reclaim the $60,000 support despite a favorable macroeconomic environment.

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