Bitcoin and Ethereum Dip 1% After U.S. Economy Grows Slower Than Expected
Bitcoin and Ethereum Prices Dip as U.S. Economy Grows Slower Than Expected
Bitcoin and Ethereum experienced a slight decline on Thursday, dropping 1% each following the release of a key federal economic report showing that the U.S. economy expanded at a slower pace than anticipated in the first quarter.
According to the Bureau of Economic Analysis (BEA), the nation’s gross domestic product (GDP) grew at an annualized rate of 1.6% in the early part of the year, falling short of economists’ expectations of 2.2% growth. The report attributed the slowdown to muted exports and reduced inventory stockpiles, despite an increase in residential construction and consumer spending.
The price of Bitcoin and Ethereum also saw a slight decrease, with Bitcoin trading at $64,690 and Ethereum at $3,160, according to data from CoinGecko. On Wall Street, the S&P 500 similarly fell nearly 1% in response to the economic report.
While the headline GDP number may suggest a slowdown, Senior Economist Sam Bullard of Wells Fargo noted that the underlying momentum of the U.S. economy remains strong. Final sales to private domestic purchasers grew by 3.1% in the first quarter, indicating robust domestic demand.
However, the report also showed that core Personal Consumption Expenditures (PCE) rose by 3.7% in the first quarter, up from 2% in the previous quarter. This could impact the Federal Reserve’s decision on future rate cuts, as higher inflation may prompt the central bank to adjust interest rates.
The Fed has already raised interest rates to a 23-year high in an effort to combat inflation, which could potentially slow down the economy and affect risk assets like stocks and cryptocurrencies. The uncertainty surrounding rate cuts, along with geopolitical tensions in the Middle East, has contributed to the recent volatility in the market, including the fluctuations in Bitcoin prices.
Despite the increase in core PCE, Bullard believes that the U.S. economy’s resilience will likely keep the Fed from making any immediate rate cuts. The FedWatch Tool from the CME Group also indicates a high probability that the central bank will maintain interest rates in May.
Overall, the mixed economic data and shifting expectations on rate cuts have influenced the performance of both traditional and digital assets, highlighting the interconnectedness of global markets in today’s economy.
