According to analysis from the Labor Department released Wednesday, the Federal Reserve (Fed) could be in line to cut rates up to two times this year. Have these fears contributed to keeping Bitcoin treading water over $8,000?
The potential cuts come in response to reports of muted inflation levels for consumers through April.
The report details that consumer pricing increased sharply in rent and healthcare. Other areas, however, like used car and truck sales, declined sharply. Overall the consumer price index (CPI) rose 1.8 percent in the twelve months through May.
Inflation, Stocks, and Trade Wars, O My!
The mix between unexpected inflation numbers and President Donald Trump’s tariff threats have led to fear in the market. While equities had rallied early in June, the market has continued selling off. The Fed’s potential rate cut will be discussed at a meeting on June 18-19. While a rate cut would seem to be a sign of growth ahead, it actually signals economic struggle. Fears about future tariff issues have also played a role. Of particular note, Trump’s tariff policy against China has now been expanded to include up to 25 percent tariffs on $200 million of Chinese imports to the US. Mexico has reportedly buckled under the pressure to open immigration talks in exchange for staving off tariffs. Current threats suggest that sanctions could be in store for gas pipelines in Eastern Europe, should Trump get his way.
Turning to Bitcoin
With uncertainty plaguing investors, Bitcoin’s price has remained relatively stable above $7,500 and has even spiked over $9,000 at the end of May. The price rise in Bitcoin has also been coupled with dramatically larger transaction volumes in recent weeks. The positive movement of Bitcoin is not surprising. Given the complexity of the markets, as well as the political maneuvering by Trump, investors are seeking safe haven assets to protect their gains. Should the Fed decide to lower interest rates, the fear in the market could quickly erase the impressive gains made last year. Because Bitcoin is severed from governmental regulation, inflationary pressures are not felt in the same way. The value of a single Bitcoin may increase or decrease with market environments, but the purchasing power of Bitcoin is related to overall economic factors rather than government policies. In this way, Bitcoin represents a stable asset for value protection. Do you think Bitcoin’s price and volume rise is related to fear over stability in the economy in recent days? Are other factors playing a role? Let us know your thoughts in the comments below!
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Jon Buck
With a background in science and writing, Jon's cryptophile days started in 2011 when he first heard about Bitcoin. Since then he's been learning, investing, and writing about cryptocurrencies and blockchain technology for some of the biggest publications and ICOs in the industry. After a brief stint in India, he and his family live in southern CA.
With a background in science and writing, Jon's cryptophile days started in 2011 when he first heard about Bitcoin. Since then he's been learning, investing, and writing about cryptocurrencies and blockchain technology for some of the biggest publications and ICOs in the industry. After a brief stint in India, he and his family live in southern CA.
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