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Impact of U.S. GDP Growth Slowdown on Bitcoin and Ethereum Prices
Following the release of a key federal economic report indicating that the U.S. economy grew slower than expected in the first quarter, both Bitcoin and Ethereum experienced a slight downturn. The Bureau of Economic Analysis (BEA) reported that the nation’s gross domestic product (GDP) expanded at an annualized pace of 1.6% early this year, significantly lower than the anticipated 2.2% growth expected by economists. This deceleration came after six consecutive quarters of GDP growth exceeding 2%.
The disappointing GDP figures were attributed to muted exports and reduced inventory stockpiles, despite a surge in residential construction and increased consumer spending. Notably, final sales to private domestic purchasers grew by 3.1% in the first quarter, indicating the underlying strength of domestic demand within the U.S. economy.
Bitcoin and Ethereum Price Movements
As the GDP report was made public, the prices of Bitcoin and Ethereum experienced a minor decline. Bitcoin fell to $64,690, while Ethereum dropped to $3,160, according to data from CoinGecko. Concurrently, the S&P 500 also recorded a nearly 1% decrease in value on Wall Street.
The slight dip in cryptocurrency prices may have been influenced by the heightened uncertainty surrounding the U.S. economy’s growth trajectory. Senior Economist at Wells Fargo, Sam Bullard, noted that the headline GDP number might be misleading and that the core Personal Consumption Expenditures (PCE) metric, a key inflation gauge for the Federal Reserve, increased by 3.7% in the first quarter.
Impact on Federal Reserve Policy
The surge in core PCE could potentially impact the Federal Reserve’s decision-making regarding interest rates. With inflation on the rise, the Fed may reconsider its approach to rate cuts in order to mitigate the risk of an overheated economy. The anticipation of stable interest rates in May increased to 90%, reflecting a cautious stance from the Fed according to the CME Group’s FedWatch Tool.
Overall, the softer-than-expected GDP growth, coupled with the uptick in core PCE, underscores the complex economic landscape that influences asset prices such as stocks and cryptocurrencies. As investors navigate the changing dynamics of the U.S. economy, the implications for crypto markets remain intertwined with broader macroeconomic trends.
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