Bitcoin price has struggled to regain momentum since hitting an all-time high of $73,800 on March 14. All this seems to be the result of increasing geopolitical tensions in the world, but especially rising inflation in the US, which has resulted in the US Federal Reserve continuing to postpone its interest rate cuts.
After all, yesterday US gross domestic product (GDP) for the first quarter of 2024 came in much lower than expected. Are we still headed for recession? What does this mean for the price of Bitcoin?
For those who don't know what happened:
First, Q1 2024 GDP growth slowed to just 1.6%, less than half of the 3.4% Q4 2023 figure.
This reading is roughly 50% below Goldman Sachs' expectations.
But it gets worse.
At the same time, US core PCE prices… pic.twitter.com/5Rct3i9TGh
— Kobeissi Letter (@KobeissiLetter) April 25, 2024
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Stagnation in America?
America is secretly beginning to look like it's headed for a period of stagnation. This is a situation where inflation rises when the economy contracts. Such scenarios are an absolute nightmare for central banks and governments.
It was reported yesterday that the US economy grew just 1.6 percent in the first quarter of 2024, while Goldman Sachs was betting on growth of 3.2 percent. What is happening to the US economy?
In the last quarter of 2023, it still grew by 3.4 percent and is now suddenly starting to slow down. At the same time, the US Federal Reserve's preferred inflation gauge, the core PCE price index, appeared to be higher than expected.
While inflation appears to be a growing problem, should interest rates be cut due to a weak economy? The US Federal Reserve is in an increasingly difficult position.
What does this mean for the price of Bitcoin?
Initially, this uncertainty will put downward pressure on the price of Bitcoin. It is still too early to talk definitively about a stagnation situation, but this is far from the data expected by the US Federal Reserve.
In fact, we can say that this is the worst possible outcome for the US Federal Reserve.
In the short term, I expect this won't give us the bitcoin basis to continue the bull market, but in the long term it could actually be positive. Economic crises are certainly not fun, but they mean that the US Federal Reserve needs to get its liquidity guns (money printers) out of position.
In general, it is better to use it for assets with natural scarcity (gold, bitcoin, stocks).
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