The weaker-than-expected performance of the U.S. economy and declining inflation data have revived hopes for a more accommodative Fed, and analysts expect that Bitcoin (BTC) may benefit more than stocks in the coming months.
Analysts say that the contraction in U.S. GDP and declining inflation have increased hopes for interest rate cuts from the Fed.
The U.S. economy contracted in the last three years for the first time, and the Federal Reserve's preferred inflation measure, the core personal consumption expenditures (PCE), remained steady last month. The decline in core personal consumption expenditures from 3.0% to 2.6% year-on-year has reinforced the narrative that inflation is slowly retreating towards the central bank's target of 2%.
Bitcoin leads the recovery.
After the data was revealed, Bitcoin surpassed $97,000, achieving more than a 13% increase since 'Rescue Day,' a symbolic term referring to a renewed recovery among cryptocurrency investors.
In contrast, the S&P 500 index recorded gains of less than 1% over the last 30 days, highlighting the increasing divergence between digital assets and traditional stock markets.
Valentin Fournier, senior research analyst at BRN, said in a market update on May 2, 'As inflation trends toward the Federal Reserve's target of 2%, expectations for multiple rate cuts are rising. This could lead to a new wave of liquidity injections, and riskier alternative assets like cryptocurrencies may benefit more than stocks, which may struggle in a slowing economy.'
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