The CoinSpeech team collected the most important takeaways from Benjamin Cowen’s recent appearance. In his new video, Cowen dives into the Federal Reserve’s recent decisions, the broader impact on inflation, and the implications for Bitcoin. You can find Benjamin Cowen’s new video below.
Federal Reserve’s Stance on Interest Rates
Cowen discusses the Federal Open Market Committee (FOMC) decision to hold interest rates steady at 5.5%. He notes that the U.S. economy is relatively stronger than counterparts like the ECB and the Bank of Canada, who have initiated rate cuts. “The U.S. has the luxury of holding rates higher for longer,” says Cowen. This stance is deemed bullish for the U.S. dollar.
Bitcoin’s Interaction with Monetary Policy
According to Cowen, Bitcoin dominance is expected to rise as the Federal Reserve maintains high interest rates. “The FED has that luxury, other central banks will be forced to cut sooner, and this should be bullish for things like the dollar,” notes Cowen. He suggests that blue-chip assets, including Bitcoin, are likely to perform better than their smaller counterparts.
Shifting Projections on Rate Cuts
One of the striking changes is the revision in the Summary of Economic Projections (SEP) by the FOMC. Initially, there were expectations of three rate cuts by the end of 2023. However, this has now been reduced to one cut. “This signifies they’ve reduced their expectations of three rate cuts down to one and that’s a big change,” Cowen remarks.
Unemployment and Recession Fears
Cowen also finds it puzzling that the FOMC’s unemployment rate projections remain unchanged despite typical trends during rising unemployment rates. “They still think it’s going to be 4% now,” he says. This contradictory stance might signal that the FED is providing room to maneuver future policies, such as potential rate cuts.
The Bitcoin Market and Historical Trends
Cowen highlights fascinating historical parallels. In June 2019, the FED signaled no rate cuts until 2020 but proceeded to cut rates a month later. During that period, Bitcoin dominance strengthened while altcoins suffered. “Altcoin market bled back to the king and it finally broke support,” Cowen notes, suggesting a similar trend could occur if the market begins to believe in delayed rate cuts.
Inflation and Its Components
The latest inflation data shows a minor slowdown to around 3.25%, but Cowen points out this is still significant. “Inflation has been holding 3% as a low for almost a full year now,” he says. Specific categories like housing and medical care showed inflationary pressures, although most categories indicated disinflation.
Bitcoin Dominance and Market Trends
Reflecting on Bitcoin’s market position, Cowen believes that dominance is set to rise sharply. “The people that underestimated the FED’s resolve to stay higher for longer are also the ones that faded Bitcoin dominance,” Cowen asserts. He argues that monetary policy is a crucial factor, with Bitcoin continuously absorbing liquidity while many altcoins decline.
Conclusion and Future Speculation
Cowen expects Bitcoin dominance to grow to around 60%, pushing other cryptocurrencies further down in the process. With FED rate cuts continually pushed out, Bitcoin remains in a favorable position. “Bitcoin USD has gone up for the most part over the last several years,” Cowen concludes, although acknowledging periods of decline.