Bitcoin and Ether in Decline, Stagflation Fears Driving Cryptocurrency Markets Down
Cryptocurrency markets are on the decline next week as stagflation concerns rise again in the US. There are losses in Bitcoin and Ether prices. Cryptocurrency markets, which started the week with mixed signals, are trading in the red as fears of stagflation rise in the US, which is seen as the worst-case scenario for risky assets.
According to CoinDesk Indices data, Bitcoin, the cryptocurrency with the highest market value, is trading around $62,400, down 2.5% in the last 24 hours. Ethereum, on the other hand, lost 3% in value and fell to $ 3,200. The CoinDesk 20 (CD20) index, which measures the most liquid digital assets, decreased by 2.6% to 2,197 points. The market currently appears to be in an uncertain situation as it faces significant bullish and bearish signals for the coming period.
As the organization called QCP stated in its weekend notes, the threat of stagflation, where high inflation and low growth come together, is very real. “Lower-than-expected US GDP data indicates a slower economy, while higher core PCE data indicates an inflation problem that the Fed is constantly struggling with,” QCP notes said.
Last week’s US GDP report showed that the world’s largest economy grew at an annual rate of 1.6% in the first quarter of this year, following the previous quarter’s 3.4% growth. On the other hand, the price of personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure, rose to an annual rate of 3.4% in the first three months of the year, from 1.8% in the last quarter of 2023.
The stagflation risk created by the combination of a slower growth rate and higher inflation further weakened the possibility of a Fed rate cut. Most traders on prediction market platform Polymarket still see no rate cut as the most likely scenario. The probability of this scenario occurring is 35%. The possibility of an interest rate cut is on the rise; This probability, which was 26% a week ago, has now reached 29%. At the beginning of the month, this probability was 14%.
QCP also assesses nearly $1 trillion in assets in the Treasury General Account (TGA) and $400 billion in the Reverse Repurchase Program (RRP), suggesting that Janet Yellen’s fiscal strategy could push up all risk assets by providing up to $1.4 trillion in liquidity into the financial system. he stated.
This $750 billion NPL figure is important because it provides an important signal to financial markets about the US government’s fiscal goals and profoundly affects economic stability and growth.
On the other hand, the launch of Bitcoin exchange-traded funds (ETFs) in Hong Kong on April 30 is also attracting the attention of investors. However, news that investors in mainland China would not be able to trade the ETFs dampened the excitement generated by the launch.
