Stick with Bitcoin, 10x Research said after the Federal Reserve forecast only one rate cut in 2024

With the Federal Reserve forecasting only one interest rate cut in the coming year and U.S. inflation data below expectations, 10x Research still recommends owning Bitcoin.

10x Research continues to advocate for Bitcoin, even as the leading cryptocurrency comes under pressure due to hawkish interest rate forecasts from the Federal Reserve. On Wednesday, the U.S. central bank left its benchmark borrowing costs unchanged at 5.25% to 5.5%, as expected. However, it expects only one rate cut this year, down from the three it forecast in March. As CPI data released earlier in the day was lower than expected, the Fed's new interest rate forecast may have spooked the market, leading to lower bitcoin prices.

According to CoinDesk data, the leading cryptocurrency by market cap fell back to $67,400 after the release of the Fed's interest rate forecast, reversing the trend of rising to $70,000 after the release of the CPI.

However, 10x Research remains optimistic on Bitcoin, confident that the rally will soon resume. Markus Thielen, founder of 10x Research, said in a memo to clients on Thursday: "Our recommendation remains the same: Stick with the winners (Bitcoin) and avoid the others (like Ethereum)." Our previous analysis has shown that lower CPI readings tend to lift Bitcoin prices, and we expect this trend to continue."

Us consumer price inflation was unchanged in May, missing expectations of a 0.1 per cent rise and down from 0.3 per cent in April. On an annual basis, inflation came in at 3.3 per cent, in line with expectations and down from 3.4 per cent in April.

According to Thielen, slowing inflation has historically attracted large inflows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs). The ETFs raised $100 million on Wednesday, according to provisional data from Farside Investors, ending a two-day outflow trend.

Thielen explained that after the ETF debuted on January 11, liquidity dried up due to high inflation data in December, which dampened expectations of a Fed rate cut. Liquidity returned in February, pushing bitcoin higher.

In late May, Thielen noted that "ETF flows turned positive at the end of January, but only accelerated slightly ahead of the February 13 CPI release." However, when inflation rose to 3.2 percent again on March 12, Bitcoin ETF inflows stopped as the market discounted 2-3 rate cuts."

Thielen expects the Fed to signal more rate cuts later this year, even though inflation has peaked.