The cryptocurrency market has continued its downward trend this week amid growing concerns of stagflation, following unexpected slowdowns in U.S. economic growth during Q1 2024. Bitcoin (BTC) and Ethereum (ETH)—the two largest cryptocurrencies—have dropped over 10% and 2%, respectively, from their March all-time highs. With weekly losses persisting and stagnant ETF inflows, some analysts argue Bitcoin's bull run has already peaked.
Economic Indicators Fuel Stagflation Concerns
The U.S. Commerce Department's April 25 report revealed Q1 GDP growth slowed to an annualized rate of 1.6%, down from Q4 2023's 3.4%. Concurrently, the Fed's preferred inflation gauge, the PCE index, showed prices rising to 3.4% in Q1—nearly double Q4 2023's 1.8%. This combination of slowing growth and sticky inflation has reignited stagflation fears while diminishing expectations for Fed rate cuts this year.
Blockchain prediction platform Polymarket data reflects this shift: traders now assign a 35% probability (up from 26% last week) that the Fed will maintain current rates through 2024.
Key Factors Influencing Bitcoin's Trajectory
CoinDesk analyst Omkar Godbole identifies the upcoming U.S. Treasury quarterly refunding announcement as critical for Bitcoin's momentum. This report will clarify government borrowing needs and Treasury General Account balances, potentially signaling fiscal policy directions.
Meanwhile, crypto sentiment has turned bearish:
- Veteran analyst Peter Brandt noted on April 27 that Bitcoin's bull cycle shows "decaying momentum," with 80% of its driving force already dissipated.
- Historical patterns suggest Bitcoin never closes lower for five consecutive weeks outside bear markets.
- Brandt estimates the current cycle peaked around $70K in March but acknowledges prices could still climb higher.
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Diverging Perspectives on Market Health
Some analysts highlight positive distinctions in this cycle:
- Institutional participation via Bitcoin ETFs contrasts sharply with past retail-driven rallies.
- April's 12% decline from March's $71.4K high appears milder than previous bull market corrections.
- Glassnode's James Check observed Bitcoin's 20% pullback from its $73K ATH pales against 2017's frequent 20-30% drops.
Additionally, Bitcoin's post-halving inflation rate (<1%) means only 450 new BTC enter circulation daily—making it scarcer than gold. This scarcity reinforces beliefs in Bitcoin's superior store-of-value properties versus traditional safe havens.
FAQ: Addressing Top Investor Concerns
Q: Could stagflation actually benefit Bitcoin?
A: While theoretically possible, current market reactions suggest investors view stagflation as risk-off, favoring traditional hedges over crypto.
Q: What's the significance of ETF flows stalling?
A: Slowing inflows indicate weakened institutional demand, removing a key price support from this cycle.
Q: How might the Fed's policies impact crypto next?
A: Hawkish shifts could prolong the downturn, while unexpected dovishness might reignite bullish momentum.
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Source: Jihao News (excludes images)