AI Sentiment: Cautiously bearish
Reason: Bitcoin's price is facing a decline due to changes in federal rate cut expectations and potential hikes, despite some experts believing in the cryptocurrency's potential for rebound in the long term.
The cryptocurrency market is experiencing a lot of pressure, with Bitcoin facing a decline. This decline is attributed to the recent changes in the federal rate cut expectations by Goldman Sachs and a potential hike highlighted by Bank of America (BoA). These changes were triggered by a blowout jobs report, which has increased speculation about the Federal Reserve tightening its monetary policy sooner than anticipated.
Given that Bitcoin and other cryptocurrencies have often been viewed as a hedge against inflation, the potential shift in the Fed's policy has influenced the price of Bitcoin. The cryptocurrency, which had previously been on an upward trend, saw a drop of 3.5% in the 24 hours following Goldman Sachs' revision of the federal rate cut expectations. The investment bank now anticipates three rate hikes in 2022, instead of the initially projected one.
Further adding to Bitcoin's woes, the BoA released its own report. The financial institution sees a potential hike of the federal funds rate after the recent strong jobs report. The report showed that the U.S. economy added 467,000 jobs in January, significantly higher than the 125,000 jobs that economists had predicted. This improvement in the labor market might prompt the Federal Reserve to raise interest rates in an effort to curb inflation. Such a move would likely affect assets like Bitcoin, which thrive in a low-interest-rate environment.
Despite these pressures, some experts believe that Bitcoin's fundamentals remain strong and that the cryptocurrency may rebound in the longer term. They argue that the digital asset's scarcity, coupled with increasing adoption by institutions and retail investors, could potentially offset the impact of the expected policy shifts. While it's true that Bitcoin's price is sensitive to macroeconomic factors, it's also influenced by its own unique dynamics. Therefore, although Bitcoin is currently under pressure, it isn't necessarily destined for a downturn.