However, an industry expert has explained why the US macroeconomic landscape might not get better for the crypto and other risk asset markets over the next few months. This interesting projection suggests that the future looks a tad uncertain for the Bitcoin price and the rest of the cryptocurrency market.
Bianco mentioned that it would be reckless for the US Fed to cut interest rates with the economy recovering strongly and prices rising. The macroeconomics researcher said that slowed imports — due to increased trade tariffs — have been positive for the nation’s gross domestic product (GDP).
Bianco further explained:
Imports are “lost GDP.” It is a product manufactured outside the United States. Therefore, spiking imports, which cause a larger trade deficit, are a drag on GDP. It was the biggest reason the Q1 GDP was negative (revised yesterday from -0.3% to -0.2%). Liberation Day dramatically slowed imports, and the trade deficit reversed. This is boosting Q2 GDP. It is now estimated to be 3.8%, and could go higher as May was another slow import month.
The financial market expert also highlighted the resulting tariff-driven inflation happening in the US and how it could drive the 2.3% year-on-year CPI higher. Ultimately, Bianco believes that the probability of a Fed rate cut is extremely low, as the opposite would be a reckless move.
Typically, lower interest rates mean that riskier assets, like crypto and stocks, are more attractive investment options, as the yields on traditional assets (like treasury bonds) diminish. As seen in the past years, the Bitcoin market tends to rally whenever the US Fed cuts interest rates.
In essence, rate cuts by the US Federal Reserve are generally bullish for Bitcoin and crypto, as they push investors to alternative markets for higher gains. However, it is important to consider the state of the economic environment before the rate cuts, as a positive macroeconomic landscape is often more favorable for the riskier assets.
It is also worth mentioning that the absence of rate cuts over the next three months might not necessarily have the opposite bearish effect on the Bitcoin market.
