Key Points
- Bitcoin’s recovery stalled at $98K and dropped to $95K following Jerome Powell’s outlook on interest rate cuts.
- Demand for Bitcoin has slightly decreased amid macroeconomic uncertainty.
Impact of Powell’s Outlook on Bitcoin
The early week recovery of Bitcoin (BTC) hit a roadblock at $98K and fell to $95K. This occurred in the aftermath of Jerome Powell’s semi-annual monetary report to the U.S. Congress. Powell, the chair of the Federal Reserve, expressed a cautious stance on interest rate cuts, stating that there was no rush to adjust policy.
A lower interest rate typically encourages investment in risk-on assets like Bitcoin and stocks. However, the combination of Powell’s cautious outlook, Trump’s tariffs, and a slow Fed rate cut outlook have increased bearish sentiment.
January CPI Report and Bitcoin
The Federal Reserve rate cuts are influenced by the U.S. labor markets and inflation status. Therefore, attention is now shifting to the January CPI (Consumer Price Index) report. If the actual CPI is higher than the forecasted 0.3%, it could be seen as bearish, as it would encourage the Fed to maintain the interest rate for a longer period. Conversely, a lower CPI print could slightly boost the market and increase the odds of a rate cut.
Despite this, interest traders are pricing a 95% chance of another rate pause during the next FOMC meeting in mid-March. It remains to be seen whether the CPI print will change this market pricing.
The Coinbase Premium Index, which tracks U.S. investors’ appetite for Bitcoin, shows that demand has been muted due to these uncertainties. After a surge in early February, the index has returned to a neutral level, and Bitcoin has retraced from $101K to $95K.
Should the Coinbase Premium Index dip further into negative territory, it could limit Bitcoin’s short-term rebound, despite the pending supply shock as the OTC balance shrinks.
According to the Coinglass liquidation heatmap, Bitcoin’s market could continue to be volatile. This suggests that Bitcoin could continue fluctuating between $94K and $100K in the short term.
