Bitcoin price holds above $34,500 as the Fed maintains a hawkish stance

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(Kitco News) – Sideways trading for Bitcoin (BTC) continued on Tuesday as mild profit-taking has seen many tokens in the top 200 record slight losses while traders look to reposition themselves amid the early stages of a bull market cycle.

“The macroeconomic landscape is signaling important shifts that macro investors and hedge funds should take note of, especially regarding Bitcoin’s outlook,” said Mathieu Ziaei, portfolio manager and risk officer at Criptonite Asset Management. “The Federal Reserve’s decision to maintain interest rates, coupled with a high probability of continued pauses, reflects their commitment to fighting inflation. Disinflation and softer economic data are contributing to this outlook, potentially creating a more favorable environment for both traditional and alternative assets.

Data provided by TradingView shows that BTC started experiencing downward pressure early in the trading day, sliding from Monday’s close at $35,060 to a low of $34,530 before bulls managed to push it back above $34,800.

BTC/USD Chart by TradingView

While Investors had hoped that signs of a weakening U.S. economy would prompt the Fed to ease up on its tightening campaign, Minneapolis Fed president Neel Kashkari caused many to reassess those expectations on Monday when he said that the central bank likely has more work ahead of it to control inflation.

“The economy has proved to be really resilient even though we’ve raised interest rates a lot over the past couple of years. That’s good news,” Kashkari said in an interview on Fox. “We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.”

“The labor market, while showing some signs of softening, remains dynamic and resilient, distinguishing this faintness from economic weakness,” Ziaei said. “This nuanced perspective is essential for assessing the broader economic context.”

“In financial markets, the impact of these macroeconomic trends is evident,” he said. “Softer data and the Fed’s stance have led to a decline in Treasury yields, which has been positively received by equity markets. The belief that this ‘softness is bullish’ has fuelled substantial gains in stocks, underscoring the potential for equities to thrive in this environment.”

“Bitcoin is also poised to benefit from this macroeconomic backdrop, on top of other positive catalysts,” Ziaei said. “The market dynamics appear healthy within the current uptrend, with Bitcoin dominance remaining strong. Altcoins are also exhibiting strength, suggesting a positive short-term outlook for the crypto market.”

“In summary, the macroeconomic landscape is shifting towards a softer but not necessarily weaker environment,” he said. “The Fed’s commitment to maintaining interest rates amid disinflation and softer economic data creates a backdrop in which Bitcoin may continue to thrive, making it an attractive asset for macro investors and hedge funds.”

“Adding these thoughts with the fact that Bitcoin owners have such strong convictions in their asset, that 88.5% of holders haven’t moved any Bitcoin in the past three months – a period in which Bitcoin has gained more than +44% amidst a broader trend of being up +110% YTD. This might just be a warm-up to what comes next,” he concluded.