Key Points
- Bitcoin’s price has fallen below $63,000 due to concerns about potential stagflation in the US economy.
- QCP Capital analysts predict a potential $1.4 trillion liquidity injection into the US economy could drive bullishness.
The price of Bitcoin has dipped under $63,000, stirred by fears that the US economy may be heading towards stagflation.
A recent report from QCP Capital highlighted that alarming data from the US indicates a slower economy and persistent inflation, which could lead to a stagflation scenario – a mix of negative GDP growth and high inflation.
US Economy Data and Bitcoin Price
The US Department of Commerce, last week, revealed data indicating that the first-quarter GDP growth was at an annualized 1.6%, significantly below the 2.5% consensus expectation. Consequently, the Bitcoin price has decreased by over 2.6% in the past 24 hours.
Liquidity Injection and Market Bullishness
Despite the macroeconomic uncertainty, QCP Capital analysts foresee the potential for a $1.4 trillion liquidity injection into the US economy, which could be the primary driver for bullishness towards the end of the year.
The US Treasury General Account (TGA) reportedly holds close to $1 trillion in assets following large US treasury issuances this year and robust tax receipts. This could lead to a potential injection of $1 trillion in liquidity into the financial system if the US Government decides to spend the money in the TGA.
Investors are also anticipating announcements this week from the Federal Open Market Committee Meeting, where the US Federal Reserve is expected to keep rates steady, and the US employment report. These announcements will influence investor expectations regarding the timing of potential rate cuts in 2024.
Equity Markets and Bitcoin
Despite the decline in the Bitcoin market, broader risk assets remain robust amidst increasing uncertainty about when the Federal Reserve will initiate rate cuts this year. Major stock indices have remained strong despite the reality that cuts might come later than expected.
In London, the FTSE 100 began Monday with a 32.13-point increase to 8171.96, reaching a new all-time high of 8185 in early trading.
