Bitcoin on Thursday withstood another important macroeconomic test and stabilized around the $64,700 level. Relief to financial markets came from both easing sell-offs in technology and semiconductor stocks, and most importantly from June’s U.S. PCE inflation data. The year-over-year pace of this indicator fell from 4.1% to 3.7%, with the index recording its very first month-over-month decline since 2020. Although the direction of development is positive for risk assets, inflation still significantly exceeds the Fed’s 2% target and the question remains how much influence the central bank’s future steps will have on bitcoin itself.
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Stock markets in the green and key Fed numbers
The situation calmed down after a volatile start to the week not only in cryptocurrencies, but also in the U.S. stock market, where previous pressure on semiconductor companies eased. This optimism indirectly helped bitcoin avoid stronger selling pressure during the U.S. trading session, while the S&P 500 and Nasdaq Composite indices strengthened significantly. Investor attention focused fully on the Personal Consumption Expenditures (PCE) index, which is the U.S. central bank’s preferred inflation metric. June brought the expected year-over-year slowdown to 3.7%, which after May’s 4.1% marks the end of the previous upward trend.
However, the crucial signal was the first month-over-month decline in PCE since 2020, which was accompanied by continued growth in nominal personal consumer spending of $65.2 billion. This points to a key detail – inflation has slowed, but American consumption has not frozen. For financial markets, this combination of falling price pressures and stable economic activity is generally much more favorable news than a sharp drop in inflation caused by a hard economic cooling.
Still, we cannot speak of a definitive turnaround, as the current pace remains nearly double the central bank’s long-term target and some economists warn that the Fed does not have the situation fully under control.
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Bitcoin’s new era and the central bank’s waning influence
The new macroeconomic data came just a day after the Federal Reserve kept interest rates in the 3.50 to 3.75% range, while opinion differences within the FOMC committee are growing on the optimal monetary policy settings. However, Bitwise Chief Investment Officer Matt Hougan expects that future interest rate changes will no longer have as dramatic an impact on bitcoin as in the past.
His argument is based on the fact that after wild years full of percentage jumps, the market now expects movement of only 50 basis points over the entire next year. If rate adjustments are indeed minimal, individual Fed decisions will gradually lose the ability to trigger such massive volatility in the cryptocurrency market.
Bitcoin is also entering a phase where, thanks to spot ETFs, institutional investors and corporate purchases, it is much less dependent on the macroeconomic environment itself, which helps dampen the impact of interest rates. Added to this is the expected arrival of new Fed Chair Kevin Warsh, who could transition to a more cautious rate adjustment style in the mold of Alan Greenspan after the aggressive period under Jerome Powell.
Although softer monetary policy may support risk assets under otherwise equal conditions, the real development of inflation will be decisive. For bitcoin, what will be crucial is whether real capital flows definitively take the leading role in valuation instead of constantly monitoring every macroeconomic number from the U.S.
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