Bitcoin

Crypto Volatility Expected as US Releases Key Economic Data

Published

7 months ago

August 5, 2024

Coin2049 Newsletter

The crypto market’s correlation with key macroeconomic events has returned after dissipating for most of 2023. With the influence back on, crypto market participants must brace for volatility with key releases lined up this week.

In a sentiment-driven market, getting ahead of market-moving economic data releases is critical for traders and investors looking to revise their trading strategies.

What Could Cause Market Volatility This Week

Four events will be of interest to crypto market players this week. They include:

US Economic Calendar. Source: MarketWatch

S&P Final US Services PMI

Traders will watch the S&P Global Services PMI on Monday, which is compiled by the S&P Global. Sectors covered include consumer (excluding retail), transport and information, communication, finance, insurance, real estate, and business services.

In July, the S&P Global Services PMI beat expectations of 55, rising to 56 points, higher than June’s 55.3. This indicates expansion in the services sector, a positive sign for traditional markets, showing higher service demand.

US Trade Deficit

Markets also await the US trade deficit on Tuesday, which could cause TradFi and crypto volatility this week. Like the S&P Services PMI, the country’s trade deficit also pointed to increased services in June and more car exports.

The two positive data points to sharp increases in business inflows, reaching their quickest pace in over a year.

“The US is transitioning to a services economy, less manufacturing,” Lumida Wealth CEO Ram Ahluwalia said over positive services data.

These lead to increased investment opportunities and improved economic conditions, boosting sentiment in traditional markets like stocks. The impact may not be as direct or significant on crypto compared to traditional markets. However, if the positive trajectory continues, capital could rotate into risk-on assets like crypto.

Positive economic data often influences investor sentiment in the crypto space. As traditional markets strengthen, investors may become more confident in the economy. This could increase risk appetite and lead to greater interest in alternative assets like cryptocurrencies.

Consumer Credit

The US Consumer Credit data for June will be released on Wednesday, July 7. The data reports outstanding credit extended to individuals. The data helps measure conditions in consumer credit markets and analyze the effects of monetary policy. In May’s report, released on July 8, consumer credit increased at a seasonally adjusted annual rate of 2.7%. Revolving credit increased at an annual rate of 6.3%, while non-revolving credit also increased at an annual rate of 1.4%.

The increase in consumer credit indicates that consumers are borrowing and spending more. In traditional finance markets, this is a positive sign for the economy. It suggests consumers are more confident about their financial situation, which explains the willingness to take on debt to make purchases.

If authorities report a similar trend in June, it would stimulate economic activity and drive corporate earnings, leading to higher stock prices. Nevertheless, there is a risk associated with higher consumer credit levels. If consumers become overleveraged and struggle to repay their debts, it could lead to defaults and financial instability.

This could negatively affect traditional finance markets by increasing volatility and investor uncertainty. Crypto, on the other hand, could benefit indirectly from the implied stronger overall economy. Increased economic stability and consumer activity could attract investors to alternative assets like cryptocurrencies.

Richmond Fed President Tom Barkin’s Speech

The Richmond Fed President Tom Barkin will speak on Thursday, August 8, giving insight into policymakers’ thinking and potentially inspiring traditional market and crypto volatility. He will also comment on what recent economic reports mean for future action from the central bank. The Federal Open Market Committee (FOMC) recently decided to keep interest rates unchanged at 5.25%—5.50% for the eighth consecutive meeting.

Jerome Powell, the Federal Reserve (Fed) chair, did not explicitly signal a September rate cut. He demonstrated increasing but cautious optimism about disinflation progress resuming in the second half of 2024.

“He is clearly expecting a correction of some kind or otherwise simply cannot see better investments than Treasury bills. The Fed needs to drop rates. They have been foolish not to have done so already,” X CEO Elon Musk said in a Sunday post.

Musk’s comments came following a lackluster jobs report last week, which raised concerns about an economic slowdown. Meanwhile, Wall Street banks advocate for aggressive interest rate cuts amid evidence that the labor market is cooling. Citigroup economists Veronica Clark and Andrew Hollenhorst, for example, anticipate “half-point rate cuts in September and November and a quarter-point cut in December.”

JPMorgan economist Michael Feroli echoed Clark and Hollenhorst, adding that there’s “a strong case to act” before the next meeting on September 18. According to Feroli, Powell may not “want to add more noise to what has already been an event-filled summer.”

Macro Data Drives Crypto Sell-Off

Meanwhile, crypto volatility has markets bleeding, with the total market capitalization down a stark 12%. Bitcoin is down 12.35%, trading for $53,000 at the time of writing, while Ethereum lost 20%.

Some ascribe the crash to the Japanese stock market suffering its worst losses since 1987. Market analyst Zach Jones associates the crash with Japan defending its Yen currency and dumping all of its Treasury Holdings (US-owned debt).

“Japan created an everything bubble in the 80’s/90’s. The bubble got so big that in the 30-40 years since their stock market has never gotten close to the highs of the bubble. The US economy has a 122% debt to GDP ratio which is insane. Japan has doubled that. They were between a rock and a hard place, either letting their currency collapse and experience a Great Depression-esque collapse or printing money and hyperinflating their currency. They chose to print hundreds of billions of dollars per day to defend their currency. This has been an inevitability to anyone who pays attention to markets,” Jones wrote.

Elsewhere, Republic ticket nominee for the November elections, Donald Trump, blames the recent financial markets crash on Kamala Harris, Joe Biden, and “inept US leadership.”

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.

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VanEck Tool Shows Strategic Bitcoin Reserve Can Trim US Debt

Published

1 day ago

February 21, 2025

Coin2049 Newsletter

Asset manager VanEck has stated that a Strategic Bitcoin Reserve could help mitigate the US’ growing debt, which currently stands at $36 trillion.

To explore the potential effects of this idea, the firm has developed an interactive tool inspired by the BITCOIN Act.

How Will a Strategic Bitcoin Reserve Reduce US Debt?

The BITCOIN Act, introduced by Senator Cynthia Lummis, outlines a plan for the US government to acquire up to 1 million Bitcoins (BTC) over five years, purchasing no more than 200,000 BTC per year.

These assets would be held in a dedicated reserve for at least 20 years. Lummis believes such a reserve could substantially reduce the nation’s debt.

Notably, VanEck’s new calculator lets users know the impact of such a reserve. The tool allows the simulation of a variety of hypothetical scenarios by adjusting different variables.

These include the debt and BTC’s growth rates, the average purchase price of Bitcoin, and the total quantity of Bitcoin held in reserve. Meanwhile, VanEck has also included their own “optimistic projection.”

“If the US government follows the BITCOIN Act’s proposed path – accumulating 1 million BTC by 2029 – our analysis suggests this reserve could offset around $21 trillion of national debt by 2049. That would amount to 18% of total US debt at that time,” VanEck noted.

The analysis is based on assumptions regarding the future growth rates of both US debt and Bitcoin. VanEck has supposed a 5% annual growth rate for the national debt. This would see it rise from $36 trillion in 2025 to around $116 trillion by 2049.

Similarly, Bitcoin is presumed to appreciate at a compounded rate of 25% per year. Its acquisition price is predicted to start at $100,000 per Bitcoin in 2025. Thus, by 2049, the price could potentially be $21 million per Bitcoin.

While the federal government considers the potential of a Strategic Bitcoin Reserve, interest is also rising at the state level. At least 20 US states have introduced bills to create digital asset reserves.

According to Matthew Sigel, Head of Digital Assets Research at VanEck, state-level bills could collectively drive as much as $23 billion in Bitcoin purchases.

President Trump’s Crypto Promise

VanEck’s move comes as Bitcoin is receiving increasing political support. US President Donald Trump has reiterated his commitment to positioning the US as a global leader in cryptocurrency.

Speaking at the Future Investment Initiative Institute summit in Miami, Trump emphasized the economic growth driven by crypto-friendly policies.

“Bitcoin has set multiple all-time record highs because everyone knows that I’m committed to making America the crypto capital,” Trump said.

Since returning to office, Trump has signed an executive order to establish a national “digital asset stockpile.” He has also nominated pro-crypto leaders to head major regulatory bodies. However, whether a Bitcoin reserve will actually be established remains to be seen.

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$2 Billion Bitcoin, Ethereum Options Expiry Signals Market Volatility

Published

1 day ago

February 21, 2025

Coin2049 Newsletter

Today, approximately $2.04 billion worth of Bitcoin (BTC) and Ethereum (ETH) options are set to expire, creating significant anticipation in the crypto market.

Expiring crypto options often leads to notable price volatility. Therefore, traders and investors closely monitor the developments of today’s expiration.

Options Expiry: $2.04 Billion BTC and ETH Contracts Expire

Today’s expiring Bitcoin options have a notional value of $1.62 billion. These 16,561 expiring contracts have a put-to-call ratio of 0.76 and a maximum pain point of $98,000.

On the other hand, Ethereum has 153,608 contracts with a notional value of $421.97 million. These expiring contracts have a put-to-call ratio of 0.48 and a max pain point of $2,700.

Expiring Ethereum Options. Source: Deribit

At the time of writing, Bitcoin trades at $98,215, a 1.12% increase since Friday’s session opened. Ethereum trades at $2,746, marking a 0.20% decrease. In the context of options trading, the put-to-call ratio below 1 for BTC and ETH suggests a prevalence of purchase options (calls) over sales options (puts).

However, according to the max pain theory, Bitcoin and Ethereum prices could gravitate toward their respective strike prices as the expiration time nears. Doing so would cause most of the options to expire worthless and thus inflict “max pain”. This means that BTC and ETH prices could register a minor correction as the options near expiration at 8:00 AM UTC on Deribit.

It explains why analysts at Greeks.live noted a cautiously bearish sentiment in the market, with low volatility frustrating traders. They suggest ongoing concern among traders and investors, particularly around Bitcoin, with traders closely monitoring key price points.

“The group sentiment is cautiously bearish with low volatility frustrating traders. Participants are watching $96,500 level with skepticism about upward momentum, while discussing possibilities of volatility clustering at low levels around 40%,” the analysts wrote.

Elsewhere, Deribit warns that while low volatility feels safe, this sense of safety is only momentary, as markets tend not to wait long.

Bitcoin Price Outlook: Key Levels and Market Outlook

Bitcoin trades around $98,243, hovering above a critical demand zone between $93,700 and $91,000. This area has previously acted as strong support, indicating buyers may step in to defend these levels.

On the other hand, a key supply zone is positioned at around $103,991, where selling pressure has historically been significant. BTC has struggled to break past this level, making it a major resistance to watch.

BTC Price Performance. Source: TradingView

From a price action perspective, BTC has been forming lower highs and lower lows, suggesting a short-term bearish trend. However, the recent price movement hints at a possible reversal, as BTC is attempting to bounce off its demand zone.

The volume profile also shows significant trading activity near $103,991, reinforcing the resistance level. Meanwhile, a noticeable low volume area near $91,000 suggests that if BTC breaks below this level, a sharp drop could follow due to the lack of strong support.

Meanwhile, the Relative Strength Index (RSI) is currently at 50.84, indicating neutral momentum. While BTC is not overbought or oversold, the RSI’s slight upward trend could signal growing buying interest.

If Bitcoin holds above the $93,700 support zone, it may attempt a push towards the $100,000 milestone. However, a breakdown below $91,000 could trigger a move lower, potentially testing the $88,000 to $85,000 range.

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Bitcoin ETFs See Institutional Ownership Multiply 55x In Less Than A Year

Published

2 days ago

February 21, 2025

Coin2049 Newsletter

The institutional adoption of Bitcoin exchange-traded funds (ETFs) has experienced an unprecedented surge in the past 11 months, underscoring a tectonic shift in the way traditional investors interact with digital assets.

Bitwise data indicates that the number of institutional holders of US spot Bitcoin ETFs has increased by nearly 55 times – from 61 in March 2024 to 3,323 by mid-February 2025. This rapid ascent indicates a heightened desire for Bitcoin exposure through regulated financial instruments.

BREAKING: Institutional investors holding #Bitcoin ETFs have increased a remarkable 54.5x in the past 11 months.

Don’t panic. HODL. pic.twitter.com/roidg4QMXJ

— Carl ₿ MENGER ⚡️🇸🇻 (@CarlBMenger) February 18, 2025

An Immense Rise In Institutional Involvement

This demonstrates a high level of confidence in the asset class, as Wall Street titans and global financial entities have substantially increased their Bitcoin ETF holdings.

Goldman Sachs has nearly doubled its investment, now possessing over 24 million shares valued at approximately $1.35 billion—a 89% increase from previous figures.

Millennium Management was not far behind, increasing its holdings by 116% to over 23 million shares, which are valued at approximately $1.32 billion.

Additionally, sovereign wealth funds have entered the market. Abu Dhabi Sovereign Wealth Fund acquired over 8 million shares, which equates to a $461 million investment in Bitcoin ETFs.

Major financial institutions’ actions suggest that they regard Bitcoin as a legitimate asset for long-term investment strategies.

Bitcoin ETF Market Surpasses $56 Billion

The total assets under management (AUM) for US-traded spot Bitcoin ETFs have increased significantly as institutional demand continues to rise. These ETFs collectively oversee nearly $57 billion in assets. BlackRock’s Bitcoin ETF is the leading player in this sector, with a total AUM of over $56 billion. This establishes it as the dominant force in the industry.

Bitcoin is currently trading at $97,202. Chart: TradingView

Bitcoin ETFs currently have in their disposal around 1.35 million BTCs, which further solidifies their market influence. The rapid accumulation of Bitcoin by these funds indicates that digital assets are becoming more widely accepted and adopted within traditional financial systems.

Image: Global Finance Magazine

Implications For The Crypto Market

The rapid rise in Bitcoin ETFs highlights a larger institutional trend towards digital assets. With wider exposure through regulated products, Bitcoin may gain stability and reputation, which would entice hedge funds, pension funds, and even individual investors to make additional investments.

Additionally, market liquidity increases and may lessen volatility as institutions amass more Bitcoin through ETFs. The long-term prospects for Bitcoin’s price and uptake are getting better as demand rises.

The Road Ahead For Bitcoin ETFs

As the institutional embrace of Bitcoin accelerates, the next phase will likely see continued expansion and regulatory developments. More institutional financial firms could follow suit, further legitimizing the crypto’s role in diversified investment portfolios.

Featured image from Reuters, chart from TradingView

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