Despite Bitcoin's 45% price increase in February, reaching $60,000 for the first time since November 2021 and finishing the month just 9% behind its all-time high, Grayscale, a leading crypto asset manager, said macroeconomic factors are likely to increase in the near term. He warns that it could hinder further crypto valuation increases.
Analysts from Grayscale last month identified accelerating inflation and the resulting reduced likelihood of the Fed cutting interest rates as major factors that could potentially hinder crypto price increases going forward.
“An important lesson from the last cryptocurrency cycle is that macro factors such as Fed monetary policy and the state of the economy can greatly impact crypto asset valuations,” Grayscale analysts said. “A less favorable macro outlook could potentially hold valuations back,” they added.
Analysts have announced that if inflation remains stubbornly high, FED officials may consider delaying interest rate cuts until later in the year or even 2025. “Generally speaking, higher US interest rates will likely be positive for the value of the Dollar and could be negative for Bitcoin,” they added.
However, Grayscale does not believe the near-term future for Bitcoin's valuation is necessarily bleak. “The most likely outcome, in our view, is that U.S. consumer price inflation will continue to decline, making it easier for the Fed to make eventual rate cuts,” the analysts wrote. They advised crypto investors to monitor upcoming inflation reports, specifically the CPI on March 12 and PPI on March 14, and the Fed's updated policy rate guidance at its next meeting on March 20.
*This is not investment advice.
