Bitcoin could face severe headwinds amid macroeconomic growth warnings, analyst says

Bitcoin could face stern macroeconomic headwinds in 2024 as inflation remains uncomfortably hot, an analyst has said.

 

The sticky inflation data for January from the U.S. Consumer Price Index (CPI), Producer Price Index (PPI), and a hot jobs report is causing an analyst to express concerns about bitcoin and the cryptocurrency market in the coming year. Robust job figures indicates increased demand in the economy, potentially leading to higher spending, and elevated CPI and PPI suggest rising costs for goods and services, contributing to inflationary pressures as businesses may pass those costs onto consumers.

 

According to Nansen Principle Research Analyst Aurelie Barthere, "we should now be looking for any sign of growth weakness as the next catalyst for cryptocurrency prices."

"I think H2 2024 is more likely to see a shallow recession/growth slow down, this would be a headwind for bitcoin," Barthere told The Block. The Nansen analyst added that there is stickiness on some components of U.S. inflation, namely services inflation, including shelter.

 

"Were inflation to re-accelerate, it would in our view be negative for crypto prices," Barthere added.

 

However, the analyst added that cryptocurrency markets are currently not focused on these macroeconomic stresses. "The cryptocurrency sector is primarily focused on new catalysts such as an ether ETF. However, I feel the next phase of the market's cycle to watch for is a slowdown in growth, which would be negative for crypto," Barthere said.

Prices have increased by 3.1% over the last twelve months, according to January's numbers for the 12-month percentage change in the CPI. (Prices increased 6.4% in the twelve months before that, from January 2022-23.) Also, the U.S. said PPI in January for final demand services rose 0.6%. The hotter readings have led to expectations for rate cuts in 2024 being less optimistic compared to those cited at the beginning of the year, according to Barthere.

The CME FedWatch tool shows that the consensus among analysts is for rates to remain paused at current levels, with any possibility of a rate cut delayed until June at the earliest. A slim majority of analysts, 52.5%, expect rates to come down a quarter-point in June, but over 35% expect rates to remain paused through that month.

Bitcoin was changing hands for $51,298 at 9:24 a.m. ET, according to The Block's Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, has increased by 0.36% to 115.07 in the past 24 hours.