10x Research Advises Holding Bitcoin Despite Fed’s Projection of Limited Rate Cuts in 2024

Inflows into Bitcoin ETFs picked up on Wednesday after U.S. inflation numbers came in lower than expected.

“Bitcoin tends to rally following softer-than-expected CPI releases,” noted 10x Research. The firm added that the Federal Reserve is likely to signal more rate cuts in the future.

Despite recent pressure on Bitcoin due to the Fed’s hawkish stance on interest rates, 10x Research remains optimistic about the cryptocurrency’s prospects. The U.S. central bank left the benchmark borrowing rate unchanged at 5.25%-5.5% as anticipated, but its forecast of just one rate cut this year, down from three in March, spooked markets and pushed Bitcoin prices lower.

Bitcoin dropped to $67,400 after the Fed’s rate projections, reversing the post-CPI rise to $70,000. However, 10x Research maintains a bullish outlook, predicting a resumption of the rally.

“Our recommendation remains unchanged: stick with the winners like Bitcoin and avoid others such as Ethereum,” stated Markus Thielen, founder of 10x Research, in a client note on Thursday. “A lower CPI number typically boosts Bitcoin prices, and we expect this trend to continue.”

U.S. consumer price inflation remained flat in May, missing the consensus estimate of a 0.1% rise and down from 0.3% in April. The year-on-year rate was 3.3%, aligning with estimates and down from April’s 3.4%.

According to Thielen, the slowdown in inflation has historically led to significant inflows into U.S.-listed spot Bitcoin ETFs. Provisional data from Farside Investors show that these ETFs attracted $100 million on Wednesday, ending a two-day outflow streak.

Thielen explained that ETF flows dried up after their debut on January 11, as December CPI came in higher, weakening the case for Fed rate cuts. Flows resumed in February, pushing Bitcoin higher. “ETF flows turned positive at the end of January but only started to accelerate slightly ahead of the CPI data release on February 13. But when inflation rose to 3.2% on March 12, Bitcoin ETF inflows stopped as the market discounted the narrative of 2-3 rate cuts,” Thielen noted.

Thielen expects the Fed to signal more rate cuts later this year as inflation has already peaked.