Bitcoin could be in for a rocky start this month as traders look to divine U.S. economic activity amid a climate of persistent inflation and a stock market rally fuelled by Big Tech.

US real gross domestic product (GDP) jumped to an annual rate of 1.4% in the first quarter of 2024, according to the third estimate released by the Bureau of Economic Analysis.

Thursday's figures contrast sharply with last year’s fourth-quarter results, which showed US economic activity had increased by 3.4%.

Data from the bureau also showed May’s personal consumption expenditures index, a key indicator of inflation, had dipped to a 2.6% year-over-year increase, down from April’s 2.7%.

“This slowdown suggests potential economic cooling,” Jag Kooner, head of derivatives at Bitfinex, told Decrypt. “Looking ahead to July, market participants should watch for a comeback in volatility as additional regulatory developments and macroeconomic policies will play a crucial role.”

In cryptocurrencies, this may increase interest in Bitcoin and other digital assets as alternative investments if traditional markets show signs of weakening, Kooner added.

A slowing economy could also spur the US Federal Reserve to begin cutting this year, which has maintained high interest rates in a bid to manage price stability and prevent economic overheating. 

Cheaper borrowing at lower rates could flow to risk assets, including Bitcoin, analysts say.

“Historical trends indicate that during economic slowdowns, investors often turn to Bitcoin as a store of value,” Kooner said.

Further clues on Fed policy are expected at the next Federal Open Market Committee meeting scheduled for July 30-31. Futures traders, meanwhile, are pricing in two rate cuts, expected sometime in the final quarter of this year.

While some are anticipating heightened volatility for July, others remain skeptical. 

“July will be a period of consolidation and low volatility,” Pratik Kala, senior digital asset investment analyst at crypto fund manager DigitalX, told Decrypt. “There is none on the horizon at the moment, but this is expected to change as we near the U.S. elections.”

Seasonality matters, too. The third quarter is seen as a period of low volatility as most key decision-makers are typically on holiday during this period in the U.S., Kala added.

The world’s largest cryptocurrency jumped to its highest point in a week late Sunday evening, near $63,700, CoinGecko data shows. Bitcoin is down 14% from its March all-time high near $73,800.