Why Bitcoin Is Set to Go Higher Despite Economic Policy Uncertainty

 | Feb 01, 2024 18:23

The U.S. Federal Reserve maintained interest rates between 5.25% and 5.5% yesterday, aligning with the widespread market predictions.

During his speech, Fed Chair, Jerome Powell, also managed to reduce market expectations of any rate cuts to happen in March. Markets now estimate the probability of rate cuts to be communicated at the Fed’s meeting in March at just 35.5%, down from 48% just a week ago.

h2 All Eyes on Inflation/h2

In the Q&A session that followed the press release, Jerome Powell substantiated the need to gain 'greater confidence' that inflation continues to trend downwards toward the desired 2% before any rate cuts can be entertained.

It’s obvious that the Fed is in a really difficult spot here.

Because apart from battling inflation, the evidence that the economic system is in distress is clear. Especially the banking sector is in distress, and prospects of that to change under the current rate environment is low.

Noteworthy, the New York Community Bank, the bank that acquired the now-defunct Signature Bank (OTC:SBNY), just saw its stock tumble more than 40%.

h2 Bitcoin Spot ETFs Net Inflows Turning Positive/h2

Although Grayscale continues to experience outflows, the rate of outflow is diminishing as the days pass, and the net inflow into the other vehicles has been picking up.

Over the last three days, the total net inflows have consistently ranged between $200 million and $250 million. I anticipate this influx of capital into Bitcoin to be persistent, which has the potential to push the price of BTC higher despite the policy uncertainty.