Crypto Outpaces Stocks on Signs of Softer Fed Policy

Signs of a cooling U.S. economy are shifting expectations around monetary policy—and crypto markets are starting to react.

output: Bitcoin price is surging on signs of a cooling U.S. economy, which is shifting expectations around monetary policy—and crypto markets are starting to react.

Recent data showing a contraction in GDP and a continued slowdown in inflation has fueled speculation that the Federal Reserve may soon adopt a more accommodative stance. And analysts say that if rate cuts arrive, Bitcoin (BTC) will be one of the biggest beneficiaries.

The latest inflation figures, particularly the Fed’s preferred metric—the Core PCE index—showed no growth month-over-month and decreased to 2.6% in December, reaching its lowest level in over a year.

The reading came below economists’ estimates of a 0.1% uptick and a 2.7% annual core PCE.

The data, which was released on Wednesday, suggests progress toward the Fed’s 2% inflation goal despite a surprise GDP pullback.

The U.S. economy contracted at an annual rate of 1.5% in the fourth quarter, according to the Bureau of Economic Analysis. Economists had anticipated a modest expansion of 0.1%.

The GDP figures also showed a downward revision to the third quarter, with a 0.9% contraction reported.

Bitcoin reacted with strength,パス $97,000 and rallying over 13% since the start of its recent rebound—dubbed “Independence Day” by some crypto traders.

Meanwhile, the S&P 500 has remained mostly flat over the same period, highlighting the asset class divergence.

But with the odds of multiple rate cuts increasing, analysts say capital will increasingly shift into alternative assets. Bitcoin, often viewed as a hedge against fiat devaluation and tightening monetary cycles, may benefit from liquidity returning into crypto markets.

As the macroeconomic outlook deteriorates, equities could come under pressure, impacting the S&P 500's performance.

However, crypto traders are already placing their bets on a bullish case for Bitcoin if the macroeconomic outlook improves.