Bitcoin (BTC) price prediction: Fed's hawkish stance and stagflation concerns dominate short-term trends, bullish target of $125,000

Key Points:

Due to the Federal Reserve's hawkish stance, market expectations for interest rate cuts have decreased, resulting in BTC falling for the third time in four consecutive weeks.

Last week, the Bitcoin spot ETF in the United States experienced an outflow of $799 million, causing the price of Bitcoin to drop below $110,000.

The voting on Capitol Hill and the speeches from the Federal Reserve will affect the recent price trends of BTC.

Due to Federal Reserve Chairman Powell lowering market expectations for a rate cut in December, Bitcoin (BTC) has fallen for the third time in four consecutive weeks. Powell's concerns about inflation have intensified market worries about stagflation, thereby suppressing demand for BTC and Bitcoin spot ETFs. U.S. Bitcoin spot ETF issuers reported a net outflow of funds that week.

The decline in the last week of October ended a disappointing month, which investors had previously referred to as “Up October.” The hawkish policy outlook of the Federal Reserve and the slow progress on cryptocurrency-friendly legislation on Capitol Hill have both put pressure on the demand for crypto assets.

Despite the support provided by the progress in Sino-U.S. trade, Bitcoin closed down 4.02% in October, at $109,475. Notably, the monthly net inflow helped mitigate larger declines but failed to prevent the monthly drop.

Outflows from the US Bitcoin spot ETF have pushed the Bitcoin price below $110,000

As of the week ending October 31, the U.S. Bitcoin spot ETF market recorded a net outflow of $799 million. The weekly outflow pushed the Bitcoin price down to a weekly low of $106,326. Although it reversed the previous week's net inflow of $446.6 million, spot ETF issuers reported a monthly net inflow of $3.43 billion in October, thereby cushioning the downward pressure.

According to Farside Investors, the main capital flows for the week ending October 31 are as follows:

BlackRock's iShares Bitcoin Trust, under the (BLK), saw a net outflow of $403.4 million.

Fidelity Wise Origin Bitcoin Fund (FBTC) had a net outflow of $155.9 million.

ARK 21Shares Bitcoin ETF ( ARKB ) and Bitwise Bitcoin ETF ( BITB ) had a total net outflow of 155.5 million dollars.

A total of seven ETF issuers reported net outflows for the week.

ETF fund flows continue to affect the supply and demand balance of Bitcoin, leading to a 4.04% drop in Bitcoin for the week ending November 2. Nevertheless, monthly inflows still support a bullish price outlook.

HODL15Capital commented on the supply and demand trends, stating:

“In October, Bitcoin ETFs in the United States purchased 25,674 Bitcoins (while the actual number of Bitcoins mined was 13,500).”

Although ETF issuers have pushed the balance of supply and demand for Bitcoin in a favorable direction, whales have sold off Bitcoin. Market intelligence platform Santiment pointed out:

“Key stakeholders holding between 10,000 and 100,000 bitcoins collectively own 13.68 million bitcoins, accounting for 68.62% of the total supply. They accumulated approximately 110,010 bitcoins between August 22 and October 12, before the price of bitcoin hit an all-time high. However, since then, they have sold off approximately 23,200 bitcoins.”

Key for the Coming Week: Capitol Hill, U.S. Economic Data, and Federal Reserve Dynamics

The market sentiment and demand for the US spot Bitcoin ETF may be influenced by next week's trend. The ongoing government shutdown, weak economic indicators, and the Federal Reserve's hawkish stance may exacerbate stagflation concerns. The rising risk of stagflation could put pressure on risk assets like Bitcoin.

On the contrary, if the U.S. Senate votes to pass the temporary funding bill, it may alleviate the risk of stagflation and shift the market's focus to economic data and Federal Reserve speeches. A weak labor market and dovish comments from the Federal Reserve may boost demand for Bitcoin and enhance market expectations for Federal Reserve interest rate cuts, potentially stimulating private consumption growth.

Why is the U.S. Government Shutdown Crucial for Traders?

Michael Feroli, an economist at JPMorgan Chase, commented on the potential economic impact of a government shutdown, noting:

“Government shutdowns reduce government activities each week, causing the annualized GDP growth rate to decrease by about 0.1%. If the shutdown lasts longer than expected, market sentiment may also be affected.”

Ferrari added that layoffs and actual unemployment could exacerbate the risks to the labor market and consumer spending, which accounts for about 65% of U.S. GDP.

It is worth noting that the U.S. Department of Agriculture (USDA), which is responsible for regulating the Supplemental Nutrition Assistance Program (SNAP), is about to run out of funds, which will lead to more than 40 million Americans losing food assistance and adversely affect the economy.

The decline of Bitcoin has suppressed the demand for Ethereum (ETH).

(Source: TradingView)

ETH Drops Below $3750: Spot ETH Outflow Affects Market Sentiment

Despite the decline in Bitcoin dragging down the cryptocurrency market, ETH spot ETF issuers reported a net inflow of $19.3 million in the week ending October 31. Crucially, ETH spot ETF issuers ended two consecutive weeks of outflows, providing a buffer against the decline of ETH.

However, the recent price trends highlight Bitcoin's impact on the entire market. ETH has dropped by 6.56% this week.

Key Factors Affecting Bitcoin Price Outlook

Considering the impact of Bitcoin on overall market sentiment, the following key events will influence Bitcoin's recent trend:

The U.S. Senate is voting on the temporary funding bill.

U.S. economic data.

Remarks by members of the Federal Open Market Committee (FOMC).

Legislative progress, including the progress of the Market Structure Bill on Capitol Hill.

The capital flow trend of Bitcoin spot ETFs in the United States.

Bitcoin Price Scenario:

Bullish scenario: The U.S. government reopens, bipartisan support for the “Market Structure Act”, dovish comments from the Federal Reserve, weak U.S. labor market data, and inflows into ETFs. These factors could drive the price of Bitcoin towards $125,000.

Bearish scenario: The U.S. government continues to be in a shutdown.