Stick With Bitcoin, Avoid Ether, 10x Research Says After Fed Predicts Just One Rate Cut For 2024

ETF inflows resumed Wednesday as U.S. inflation came in lower-than-expected.

Unit Trust ETF inflows resumed on Wednesday as U.S. inflation came in lower-than-expected, boosting the case for the Federal Reserve to begin cutting interest rates later this year.

10x Research continues to advocate for bitcoin even as the leading cryptocurrency trades under pressure following the Fed’s hawkish projections.

The U.S. central bank left the benchmark borrowing cost unchanged in the range of 5.25%- 5.5% on Wednesday, as expected. But it predicted just one rate reduction this year, down from three in March.

The Fed’s new rate prediction spooked markets, sending bitcoin lower given the softer-than-expected CPI release earlier in the day.

The leading cryptocurrency by market value pulled back to $67,400 on Thursday morning from post-CPI highs above $70,000, CoinDesk data show.

However, 10x Research maintains a positive outlook on bitcoin, expressing confidence that the rally will soon resume.

“Our recommendation remains unchanged: to stick with the winners (Bitcoin) and avoid others (such as Ethereum). Our previous analysis has shown that a lower CPI number tends to lift Bitcoin prices, and we anticipate this trend will continue,” Markus Thielen, founder of 10x Research, said in a note to clients on Thursday.

The U.S. consumer price inflation rate was flat in May, missing the consensus estimate for a 0.1% rise and down from 0.3% in April. The year-on-year rate was 3.3%, matching estimates and down from April’s 3.4%.

The slowdown in inflation attracted massive inflows into the U.S.-listed spot bitcoin exchange-traded funds, Thielen noted.

Provisional data from Farside Investors show the ETFs attracted $100 million on Wednesday, snapping a two-day outflows streak.

As reported earlier, the ETF flows dried after the debut on Jan. 11 as December CPI came in higher, weakening the case for Fed rate cuts. The flows resumed in February, pushing bitcoin higher.

“ETF flows turned positive at the end of January but only started to accelerate slightly ahead of the CPI data release on February 13. But when inflation again increased to 3.2% on March 12, Bitcoin ETF inflows stopped as the market priced out the narrative of 2-3 rate cuts,” Thielen noted late May.

Thielen expects the Fed to signal more rate cuts later this year as inflation has already peaked.

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Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.