The latest economic data has sent jitters through the cryptocurrency market, particularly affecting Bitcoin, JasmyCoin, and Avalanche. However, following the release of strong US gross domestic product (GDP) and jobless claims data, these digital assets could face further downsides.
Bitcoin’s price retreated by almost 4% on Thursday, trading at $63,950. Altcoins such as JasmyCoin and Avalanche performed even worse, each falling by over 10%. These drops mark a four-day losing streak, positioning these cryptocurrencies at their lowest levels since mid-July.
Strong US GDP Growth Influences Market Sentiment
The latest US GDP growth figures have taken many by surprise, revealing a solid 2.8% increase in the second quarter. This growth is significantly higher than the previous quarter’s 1.4% and surpasses market expectations of 2%. This robust economic performance indicates that the US economy is weathering higher interest rates better than anticipated.
According to reports, the strong US GDP growth has led to speculation that the Federal Reserve might maintain its stringent policy stance longer than initially expected. Fox Business’ senior correspondent Charles Gasparino highlighted this sentiment, noting that it’s challenging to justify a rate cut in September given such strong GDP data unless other factors, such as political considerations or forward guidance, come into play.
According to sources, this robust growth suggests that the Federal Reserve might hold rates higher for an extended period. Previous statements from Fed officials, including Jerome Powell, expressed concerns about a slowing economy, particularly focusing on the labor market. The unemployment rate rose to 4.1% in June, the highest since 2021, indicating potential issues within the labor sector.
However, despite the strong US GDP growth, many economists expect the Fed will leave interest rates unchanged in its upcoming meeting. The CME Fed Watch tool indicates that a rate cut could still occur in September, contingent on future economic data.
The next critical economic indicator to watch will be the personal consumption expenditure (PCE) data, set to be released on Friday. The PCE data is the Federal Reserve’s preferred inflation gauge and will likely influence their future policy decisions.
US GDP Growth: Implications for Bitcoin, JasmyCoin, Avalanche, and Altcoins
A hawkish Federal Reserve stance, fueled by strong US GDP growth, could negatively impact Bitcoin and other altcoins. These assets typically thrive in low-interest-rate environments. For instance, Bitcoin surged to a record high of $68,000 in 2021 when the Fed’s interest rates were near zero.
Higher interest rates generally incentivize investors to shift towards safer, interest-bearing assets rather than riskier investments like cryptocurrencies. According to reports, a steeper rate cut could potentially drive investors towards riskier assets, including cryptocurrencies, diverting funds from money market funds, which currently hold over $6.1 trillion in assets.
Despite these challenges, Bitcoin and Ethereum might see increased inflows from institutional investors following the SEC’s approval of spot BTC and Ether ETFs. This regulatory green light is expected to bolster institutional confidence in these digital assets, potentially mitigating some of the adverse effects of higher interest rates.
The cryptocurrency market’s reaction to the strong US GDP growth underscores the complex interplay between economic indicators and digital asset valuations. As the Federal Reserve navigates its policy decisions amid fluctuating economic data, the future of cryptocurrencies like Bitcoin, JasmyCoin, and Avalanche remains uncertain.
In conclusion, the robust US GDP growth in the second quarter has cast a shadow over the recovery prospects of Bitcoin, JasmyCoin, and Avalanche. While strong economic data suggests resilience in the US economy, it also implies that the Federal Reserve might maintain higher interest rates for longer, posing challenges for the cryptocurrency market.
Investors will keenly watch the upcoming PCE data and Federal Reserve meetings for further indications of the economic trajectory and its implications on digital assets. The interplay between US GDP growth and the cryptocurrency market will undoubtedly continue to be a focal point for analysts and investors alike.
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