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Bitcoin price is stuck in a downtrend even though investors are betting on Fed interest rate cuts. What gives?

The United States Consumer Price Index (CPI) rose by 3% year-over-year in June, slightly below the market consensus of 3.1%. Analysts claim that this CPI release was bullish for Bitcoin, but traders are questioning why its price remains below $58,000. Three factors could possibly explain investors’ lack of enthusiasm.

According to trader, YouTuber and analyst Daan Crypto, Bitcoin’s (BTC) weakness can be attributed to scalpers and market makers trying to liquidate leveraged longs. However, the trend favors “continuation higher,” meaning BTC should bounce back to $60,000 in the near term. Essentially, if the US central bank cuts interest rates, incentives for fixed-income investments are reduced, and some of this money will seek higher returns elsewhere.

Chris Larkin, managing director of trading and investing at E-Trade, told CNBC that the Federal Reserve is “one step closer to a September rate cut,” especially after real average hourly earnings for workers slowed 3.9% from the prior year, according to a Bureau of Labor Statistics report. Additionally, the labor force participation rate slightly increased to 62.6% in June from 62.5% in May. According to CNN, slowing wages is a strong incentive for the Fed to begin cutting interest rates. 

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