$BTC

According to Cointelegraph, Bitcoin traders are closely monitoring U.S. economic signals as the Federal Reserve faces mounting pressure from rising unemployment and inflation. Analysts suggest that a recession is becoming increasingly likely, which could ultimately benefit Bitcoin and other risk assets. The Kobeissi Letter, among other sources, predicts a challenging economic landscape for the United States, with the Federal Reserve caught between managing inflation and unemployment.

The U.S. economy is expected to suffer due to trade tariffs and inflation, creating a difficult situation for policymakers. Recent macroeconomic data, including the first quarter GDP and the Fed's preferred inflation measure, have placed officials in a difficult position. The GDP figures fell short of expectations, turning negative against a forecasted 0.3% gain. The Kobeissi Letter describes this as the Fed's "worst nightmare," highlighting the dilemma of choosing between controlling inflation or unemployment. Interest rate cuts are a focal point for crypto and risk-asset traders, as they could positively impact markets. However, the timing and extent of these cuts remain uncertain. Not reducing rates could further weaken GDP and increase unemployment, while immediate cuts might lead to another inflation surge. This "lose-lose" scenario presents the Fed with the dual threat of stagflation and a full-blown recession. The Kobeissi Letter now considers a U.S. recession as the base case scenario, supported by rising odds on prediction platforms like Kalshi.

Data from CME Group's FedWatch Tool reflects market expectations for Fed policy, which has remained conservative through 2025, despite U.S. President Donald Trump's calls for lower rates. The Federal Open Market Committee's (FOMC) June meeting is anticipated to trigger the next 0.25% rate cut, although the May meeting has only a 3% chance of such an outcome. Crypto market participants are assessing the Fed's potential actions as economic conditions become increasingly challenging. Popular trader Skew noted a shift in market sentiment, with a 63% probability of a 25 basis point cut for the June 18th FOMC meeting, up from 57% the previous day. The Fed's concerns about price pressures are compounded by economic weaknesses, especially if policy adjustments are delayed.

Crypto trader and analyst Michaël van de Poppe believes that the growing recession rumors could prompt the Fed to reconsider its policy stance. He suggests that a recession might lead to policy loosening, potentially marking a market low, increasing liquidity, and fostering a risk-on environment. This article does not offer investment advice or recommendations. All investment and trading decisions involve risk, and readers should conduct their own research before making any decisions.