10x Research Advises Staying with Bitcoin Following Fed's Forecast of Only One Rate Cut in 2024

BTC often rallies following softer-than-expected CPI data, according to 10x Research. The firm also anticipates the Fed will eventually indicate additional rate cuts. ETF inflows resumed on Wednesday after U.S. inflation figures came in lower than expected. Despite the leading cryptocurrency being under pressure due to the Fed's hawkish stance on interest rates, 10x Research continues to support Bitcoin.

On Wednesday, the Federal Reserve kept the benchmark interest rate steady between 5.25% and 5.5%, as anticipated. However, it forecasted only one rate cut this year, down from three predicted in March. This adjustment, combined with the softer-than-expected CPI data earlier in the day, likely unsettled markets and caused Bitcoin to drop.

Bitcoin's value has decreased to $67,400 since the Fed released its rate projections, reversing the post-CPI surge to $70,000, according to CoinDesk data. Nonetheless, 10x Research remains optimistic about Bitcoin, predicting a resumption of its rally.

"Our recommendation is unchanged: stick with Bitcoin and avoid other cryptocurrencies like Ethereum. Our past analysis indicates that lower CPI figures typically boost Bitcoin prices, and we expect this trend to continue," said Markus Thielen, founder of 10x Research, in a note to clients on Thursday.

The U.S. consumer price inflation rate remained flat in May, missing the consensus estimate of a 0.1% rise and down from April's 0.3%. The year-on-year rate was 3.3%, matching estimates and down from April's 3.4%.

According to Thielen, a slowdown in inflation has historically led to significant inflows into U.S.-listed spot bitcoin exchange-traded funds. Preliminary data from Farside Investors indicated that ETFs gathered $100 million on Wednesday, ending a two-day outflow streak.

Thielen explained that ETF inflows dried up after their January 11 debut because December's CPI was higher than expected, weakening the case for Fed rate cuts. The inflows resumed in February, boosting Bitcoin's price.

"ETF flows turned positive at the end of January but only started to accelerate slightly ahead of the CPI data release on February 13. When inflation increased to 3.2% on March 12, Bitcoin ETF inflows stopped as the market dismissed the likelihood of 2-3 rate cuts," Thielen noted at the end of May.

Thielen expects the Fed to signal more rate cuts later this year, as inflation has likely peaked.