Fed's Unseen Divergences Could Chill Crypto Markets

According to cryptocurrency analyst Benjamin Cowen, the recent inflation data from the US may not be as bullish for Bitcoin (BTC) as it initially seemed. The June PCE Price Index showed a 0.1% month-on-month decrease and a limited 0.1% year-on-year increase in core PCE, which was positively received by the markets.

The economy's resilience is evident from the 1.5% annual growth in US GDP and low weekly jobless claims of 197,000. However, Cowen pointed out that despite stable interest rates, three members of the FOMC voted for an interest rate increase, indicating that monetary tightening is not yet over.

Cowen noted that when bond yields rise above the interest rate, the restrictive effect of monetary policy on the market weakens. He also warned that inflationary pressures could re-emerge if the labor market heats up again, making a surprise interest rate hike in the second half of this year or in September a possibility.

Cowen's analysis suggests that investors may face a 'cold shower' with an unexpected interest rate hike, potentially accelerating the flight from risky assets. He also believes that Bitcoin's true bottom may not have been reached yet and could be found in the fourth quarter of this year.