Inflation and Delayed Interest Rate Cuts Could Harm Cryptocurrency Valuations: Grayscale
Although the price of Bitcoin surged 45% in February, surpassing $60,000 for the first time since November 2021 and ending the month 9% below its all-time high, macroeconomic factors could push the cryptocurrency’s value further higher in the near term. may act as a barrier to According to Grayscale.
Analysts at a prominent cryptocurrency asset manager specifically identified accelerating inflation last month and the resulting reduced likelihood of an interest rate cut by the U.S. Federal Reserve (Fed) as key factors potentially holding back cryptocurrency price growth in the future.
“An important lesson learned from the last cryptocurrency cycle is that macro factors such as the Federal Reserve’s monetary policy and economic conditions can have a significant impact on cryptocurrency asset valuations,” Grayscale analysts said. “A less favorable macro outlook could potentially “It could hinder valuation,” he wrote. .”
“If inflation remains high, Fed officials could consider delaying rate cuts until the end of the year or until 2025,” they explained. “It’s negative for Bitcoin.”
According to a report by CNBC, the U.S. national debt is growing by about $1 trillion every 100 days. This fact doesn’t really help inflation.
However, Grayscale does not believe that the near-term future for Bitcoin valuation is necessarily bleak. “In our view, the most likely outcome is that U.S. consumer price inflation will continue to decline, prompting the Fed’s ultimate interest rate cut,” the analysts wrote. “However, cryptocurrency investors should monitor upcoming inflation reports (particularly the CPI report on March 12, 2019 and the PPI report on March 14) and the Fed’s updated policy at its next meeting on March 20. Interest rate guidance has been announced.”
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