Amidst the hawkish interest-rate outlook and heightened tensions between Israel and Iran, Bitcoin and other cryptocurrencies are feeling the strain. Despite these challenges, some experts believe there’s potential for a rebound in the second half of the year.
While the Federal Reserve is anticipated to maintain its benchmark rate this Wednesday, futures are now suggesting one or two cuts in 2025, a decrease from the three or four predicted at the year’s beginning. Traders continue to be cautious of inflation driven by tariffs, which could prolong tight policies.
Lead research analyst at BRN, Valentin Fournier, indicated that the volatility resulting from unchanged funding rates and the Israel-Iran conflict could further pull down Bitcoin prices. He also noted that these uncertainties have slowed down recent crypto ETF inflows.
“The short-term momentum has turned negative due to a mix of hawkish rate outlook, decelerating ETF inflows, and escalating geopolitical risk,” Fournier conveyed to The Block. “The market will keenly observe the Fed’s stance on future rate cuts, which could either exacerbate the current dip or provide support.”
Bitcoin’s price fell below $103,000 following Israel’s airstrike on Iran and was trading around $105,000 on Wednesday. However, Matt Mena, a crypto research strategist at 21Shares, holds a bullish outlook if the Fed announces its first cut in September.
Mena suggests that capital rotation from traditional money markets could significantly benefit crypto ETFs if rate cuts happen in Q3. “With the S&P 500 less than 5% from its record high and money market fund assets at a record $7.5 trillion, this capital is likely to shift into risk assets like crypto when rates start to fall,” he stated.
For the time being, analysts concur that the market remains at the mercy of Fed’s language and Middle East news, keeping prices within a range until clearer signals appear. Meanwhile, BTC options open interest remains near record highs, potentially indicating investor confidence.
Disclaimer: The Block is an independent news source providing crypto industry research, news, and data. Foresight Ventures, a major investor of The Block since November 2023, also invests in other crypto companies. Crypto exchange Bitget is an anchor LP for Foresight Ventures. However, The Block continues to operate independently to provide timely, impactful, and unbiased information about the crypto industry.
