Quick Overview
- After the release of U.S. macroeconomic data on Wednesday, Bitcoin and mainstream Altcoins generally declined.
- U.S. GDP in the first quarter shrank for the first time since 2022, while the inflation indicator favored by the Federal Reserve was largely in line with market expectations.
- Analysts suggest that based on the latest economic data, the Federal Reserve may initiate rate cuts at the May policy meeting.
U.S. Macro Data Pressures Bitcoin, Market Worried About "Stagflation" Prospects
The U.S. macroeconomic report released on Wednesday put pressure on Bitcoin and the entire cryptocurrency market, with "stagflation-like" data combined with shrinking GDP and weak private sector employment growth, triggering widespread market concerns.
According to the ADP employment report, the U.S. private sector added only 62,000 jobs in April, far below the expected 108,000 and significantly lower than the 147,000 in March.
Meanwhile, U.S. GDP declined by 0.3% in the first quarter, the first negative growth since 2022, with the market previously expecting a 0.2% increase. However, looking at the Personal Consumption Expenditures (PCE) index, inflation has somewhat slowed. PCE is a highly watched indicator by the Federal Reserve. Data shows that the year-on-year PCE in March rose by 2.3%, slightly higher than the expected 2.2%; the core PCE excluding food and energy rose by 2.6% year-on-year, in line with economists' estimates but lower than the revised February data (3.0%).
Affected by this news, Bitcoin briefly fell below $94,000, dropping 1% intraday. Mainstream Altcoins such as Ethereum and Solana also declined simultaneously, driving the overall cryptocurrency market to retreat nearly 4%. However, according to The Block's market page, the market has partially recovered at the time of writing.
In the traditional financial market, the S&P 500, Nasdaq Composite, Dow Jones Industrial Average, and NYSE Composite Index all closed lower.
May Policy Meeting May Become a Critical Turning Point
David Hernandez, a crypto investment expert at 21Shares, in an email to The Block, said that the economic signals released on Wednesday were mixed, bringing new uncertainty to the market. He believes the Federal Reserve may be inclined to cut rates to provide financial relief and support.
Hernandez noted: "Federal funds rate futures currently reflect a rising market expectation of more than four rate cuts this year, as the Federal Reserve tries to find a balance between signs of inflation cooling and economic slowdown." He stated, "This delicate policy balance will be the core driver of market trends in the coming weeks."
Dr. Kirill Kretov, senior automation expert at CoinPanel, also told The Block that rate cuts could benefit Bitcoin and other risk assets. He pointed out that a weakening U.S. dollar, improved liquidity from loose monetary policy, and declining U.S. bond yields collectively create a "more supportive macroeconomic environment" for Bitcoin and the crypto market.
Kretov added: "If we add the unexpected 0.3% GDP contraction and pressure from President Trump on the Federal Reserve to adopt a more lenient policy, the possibility of a dovish turn becomes greater." He said, "With the easing of tariff risks in some areas and Bitcoin's still thin liquidity, even moderate capital inflows could cause Bitcoin to rise significantly. The current market has upward potential but is extremely sensitive to macro changes."
The U.S. Federal Reserve is scheduled to hold a meeting on May 6-7 to decide whether to cut rates, maintain current rates, or raise rates.
