Bitcoin Battles Economic Headwinds: A Dive into Current Trends

October 2nd was poised to be a pivotal day in the crypto world.

by Faruk Imamovic
Bitcoin Battles Economic Headwinds: A Dive into Current Trends
© Getty Images News/Joe Raedle

October 2nd was poised to be a pivotal day in the crypto world. The price of Bitcoin (BTC), which had been trading at $27,970, surged by a promising 5.5% intraday, pushing it to $28,600. Yet, the momentum was short-lived. One would have expected the launch of Ether (ETH) futures exchange-traded funds (ETFs) to give the crypto market a significant push.

However, this major event failed to generate the anticipated trading volumes, leaving Bitcoin's gains hanging in the balance. To the delight of investors, Bitcoin seemed to be rallying, especially with its recent ascent into the upper echelons of its price range.

However, cautionary words from the United States Federal Reserve representatives hinted at stormy economic waters ahead, casting shadows on Bitcoin's immediate future.

The Fed's Gloomy Forecast

As the crypto world buzzed with activity, on Oct.

2, U.S. Federal Reserve Vice Chair for Supervision, Michael Barr, painted a less-than-rosy picture of the economic landscape in New York. Barr expressed concerns over an impending slowdown in economic growth, which he believes could slide "below its potential." He attributed this potential downturn to higher interest rates that might stifle economic activity.

Furthermore, he stressed that the ramifications of the current monetary policy remain to be fully felt. Supporting this, data from the CME FedWatch tool revealed that financial markets are split on whether the Fed might implement another interest rate hike in 2023.

Amid this, a report from Reuters shone a ray of optimism, highlighting the U.S. as a desirable investment haven, given its "resilient economy." This is particularly noteworthy when juxtaposed against Europe and China's economic growth rates.

Bitcoin Trading: A Slowdown in Sight?

An intriguing aspect of Bitcoin's trading dynamics lies in its futures. Typically, Bitcoin monthly futures command a slight premium over spot markets. This means that sellers often request a higher price for deferred settlements.

As such, it's not uncommon for BTC futures contracts to trade at an annualized premium of 5%–10%, a phenomenon known as 'contango' - a term not unique to the crypto domain.

A Diminished Hope for Spot BTC ETF

One catalyst behind Bitcoin's remarkable 68% rise in 2023 was the anticipation surrounding the U.S.

Securities and Exchange Commission's approval of a spot Bitcoin ETF. Despite multiple delays, the recent lukewarm reception to the launch of Ether futures-based ETFs on Oct. 2 does not bode well for Bitcoin enthusiasts.