Bitcoin price is showing high volatility once again. Bitcoin, which showed expectations of rising above $100,000 by recapturing the $97,800 level in the early and mid-week, continued to decline step by step over the weekend, dropping to the $93,000 range.
The overall market sentiment was quite positive. The 'digital gold' narrative of Bitcoin formed since mid-April played a significant role in continuous rises. First, funds worth $3.4 billion flowed into digital asset product categories from traditional finance.
The flow of Bitcoin spot ETFs, which had been relatively low until March, has also significantly improved. This week, Bitcoin spot ETFs recorded net inflows for 4 out of 5 days, and maintained net inflows for 9 out of 10 business days.
The money that has flowed into Bitcoin spot ETFs over the past 10 days amounts to approximately $4.8 billion. This is a very steep increase compared to the recent 3-month trend. The fact that $3.9 billion out of the $4.8 billion flowed through BlackRock's spot ETF (IBIT), the world's top asset management company, also adds stability to the market. The Ethereum spot ETF market also detected net inflow after 8 weeks.
The fact that the US GDP contracted due to tariff policies also worked as a relative strength for Bitcoin. The US Q1 GDP recorded -0.3%, and if Q2 also shows negative growth, it could be considered a recession. This increases the likelihood of the US government using forced economic stimulus measures such as interest rate cuts.
However, the main reason for the significant drop that eliminated all gains can be attributed to the fact that major employment indicators released last week exceeded expectations, substantially removing the June interest rate cut expectations that had built up in the market. The April non-farm employment, which was expected to decrease by about 30%, maintained the March level, and the unemployment rate also remained at 4.2%, the same as March.
As employment indicators showed positive results, the CME's FedWatch also changed dramatically. Until just before the unemployment rate announcement, June was the most likely for interest rate cuts, but with the overall expectations disappearing, the interest rate cut forecast was pushed to July. The expectation of four rate cuts within the year has now decreased to three cuts in July, August, and October.
Arizona Bitcoin Reserve Bill Fails Due to Governor's Veto
Coincidentally, major positive factors expected in the cryptocurrency domain also disappeared along with the Bitcoin price decline.
First, the Bitcoin reserve bill that passed the Arizona state legislature and received high expectations was ultimately vetoed by the governor. Governor Katie Hobbs expressed in her veto letter that cryptocurrency is an 'unverified entity' and not suitable for Arizona residents' retirement savings.
The SEC's approval of the XRP spot ETF, which had generated expectations in the altcoin area, has also been postponed to June. The SEC has also delayed decisions on approving Doge spot ETF and Ethereum staking ETF.
The industry speculates that these ETF approval decisions could be finalized by mid-October. Bloomberg Intelligence's ETF analyst James Seyfarth predicted, "The SEC will also delay Solana spot ETF and Hedera (HBAR) spot ETF."
Controversy is growing around the meme coin TRUMP, which saw a 50% surge in just one day by linking a dinner with former President Trump and a White House VIP tour. This has raised conflict of interest concerns as the former president appears to be using his public office to directly boost his meme coin TRUMP. If Trump does not follow through on promised events, there is a possibility of potential fraud lawsuits.
Favorable Inflation, Stable Employment... What are the Chances of Powell's Rate Cut?
The Federal Reserve's rate decision will be made early Thursday morning (8th). Currently, the president and economic cabinet members are strongly advocating for the need for rate cuts whenever they speak.
Fed Chair Jerome Powell's stance has been that 'the tariff-related uncertainties are too large to make a rate decision'. While last week's US tariff negotiations did not produce any significant decisions, China's more positive attitude has slightly reduced uncertainties.
Moreover, the PCE inflation rate, which was most concerning, is declining at a pace consistent with expectations. The employment concerns have also been confirmed as acceptable so far. The EU and others are continuously cutting rates to preemptively respond to the negative economic impacts of US tariff uncertainties. How will the US respond? The primary point of interest this week will be how Powell's attitude might change.
Also, rates are not decided by Powell alone. So far, only Beth Hamack, Cleveland Fed President, and Christopher Waller, Fed Board member, have mentioned the possibility of rate cuts, so it will be a point of interest if more members join. Another indicator is the ISM Services PMI to be released Monday night (5th), which is expected to have a significant market impact.
In the second half of this year, with the passage of the US stablecoin bill, it is expected that massive liquidity will pour into the cryptocurrency sector. The US Treasury predicts that the current stablecoin market capitalization of $234 billion will reach $2 trillion by 2028. If this liquidity coincides with the Federal Reserve's interest rate cut, it could be a significant positive factor for the price increase of Bit and other cryptocurrencies. We wish all our readers a successful investment this week.
