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Crypto Volatility Expected as US Releases Key Economic Data

Published

3 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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Trump and Lummis Unite on $76 Billion National Bitcoin Reserve

Published

1 hour ago

November 7, 2024

Coin2049 Newsletter

Senator Cynthia Lummis is making a bold new proposal to establish a Bitcoin reserve in the US. This follows President-elect Donald Trump’s recent declarations in the run-up to the US elections.

Her bill, the BITCOIN Act of 2024, aims to have the US Treasury acquire 1 million Bitcoin (BTC) over five years, a massive move that would position the US as a leader in financial innovation.

Senator Cynthia Lummis Advocates Bitcoin Reserve

The Wyoming senator wants the plan spread across five years, with purchases of 200,000 BTC tokens every year to develop America’s Bitcoin reserve. At current rates, that translates to an investment of about $76 billion.

“We are going to build a strategic Bitcoin reserve,” Lummis shared on X (formerly Twitter).

Notably, Lummis’s side of the political divide now holds the majority in both the Senate and House committees. According to Stand With Crypto, 261 pro-crypto candidates have been elected to the House of Representatives against 116 anti-crypto candidates. On the other hand, there are 17 pro-crypto candidates in the Senate and 12 anti-crypto lawmakers.

BTC Price Performance. Source: BeInCrypto

With this, the chances of Senator Lummis’ Bitcoin Bill passing through Congress are far better. This is as opposed to the Biden administration, where efforts toward bipartisan bills were greatly stifled due to a divided Congress.

This political alignment, along with Bitcoin’s recent surge to a new all-time high, adds momentum to Lummis’ initiative. Industry leaders, including Michael Saylor of MicroStrategy and Samson Mow, have shown support, stressing Bitcoin’s potential as a national asset.

Mow highlighted Bitcoin’s value at sub-$100,000, pointing out its potential strategic importance if prices soar above $500,000 in coming years.

“Good luck Senator Lummis. I suggest acting quickly. The difference between acquiring Bitcoin below $0.1 million vs. $0.5 million will have massive geopolitical ramifications,” Mow wrote.

Framework for Secure BTC Management

The BITCOIN Act does not stop at Bitcoin acquisition. It also introduces a framework for managing Bitcoin securely within Treasury vaults. It aims to reduce national debt by half by 2045. This would serve as a hedge against inflation and a potential powerhouse for US debt management.

President-elect Trump publicly endorsed the creation of a national Bitcoin reserve during the Bitcoin 2024 conference in Nashville. His remarks continue to stir interest among crypto proponents and Republicans as the then-presidential aspirant emphasized Bitcoin as a “core of financial independence” for the US.

“It will be the policy of my administration…to keep 100% of all the Bitcoin the US government currently holds or acquires into the future. This will serve in effect as the core of the strategic national bitcoin stockpile…It’s been taken away from you,” Trump said.

Meanwhile, state governments are also eyeing Bitcoin, with Florida’s Chief Financial Officer Jimmy Patronis recently endorsing Bitcoin as a “strategic reserve” for state pensions. Florida’s pension fund, among other states like Wisconsin and Michigan, would benefit from Bitcoin’s long-term appreciation, diversifying investments amid economic uncertainty.

Nevertheless, while the plan has garnered support, it raises questions about economic risks and global impacts. Some economists warn of potential volatility in tying national debt management to cryptocurrency. However, advocates point to Bitcoin’s finite supply and growing international adoption as a hedge against inflation and market fluctuations.

With Trump’s support, a Republican-led Congress, and growing state-level backing, the plan has momentum. This makes the concept of a national Bitcoin reserve a closer reality than ever before. If implemented, the BITCOIN Act could place the US at the forefront of a global financial evolution.

“Other countries will follow,” another popular user on X added.

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Bitcoin Price Might Never Dip Below $70,000 Again After The US Elections, Here’s Why

Published

9 hours ago

November 7, 2024

Coin2049 Newsletter

The US presidential elections have come and gone, and the only thing left is the results. Interestingly, a snapshot of the Bitcoin price during the elections showed Bitcoin trading just above $70,000. This is a notable price to follow, as history shows this might be the price support for Bitcoin in the foreseeable future. Interestingly, this phenomenon goes back to the Bitcoin price levels in previous US elections.

Why Bitcoin Price Might Never Dip Below $70,000 Again

Bitcoin has largely been on an uptrend since Monday, when it kicked off a run after it rebounded to the upside from $67,000. This run continued, allowing the Bitcoin average price during the 2024 presidential elections to be around $70,110.

Historically, U.S. election cycles have often been accompanied by shifts in Bitcoin’s value, marking crucial price points that tend to establish longer-term support levels.

To understand this trend, we need to look at the past four election cycles. Back in 2012, during the early days of the crypto industry, the Bitcoin price traded at a modest $10 on the US presidential election day, a price point that now seems almost unimaginable. By 2016, Bitcoin’s election-day price had climbed to $710, setting a new baseline that it has never revisited since.

The most interesting one was what happened after the 2020 US presidential election, when the Bitcoin price was trading around $13,555. The Bitcoin price has never revisited this price point again since then up until the time of writing. What’s more interesting is that this price point even served as the lowest support level during the 2022 bear market price crash.

If these historical trends are any indication, the 2024 election-day price of $70,110 could become a similar stronghold and a price floor for Bitcoin in the coming years. This level might even serve as critical support should a bear market eventually take hold at any point.

What’s Next For The Bitcoin Price?

As of now, Bitcoin is trading above $73,200 after experiencing an intense surge over the past 24 hours. This remarkable rally saw Bitcoin climb nearly 10% within a single day, reaching an intraday high of $75,358. This milestone has now become Bitcoin’s highest trading level, as it broke past its previous all-time high of $73,737 in March 2024.

Although the Bitcoin price has pulled back slightly likely due to some investors cashing in on recent profits, the rally is expected to resume anytime from now. Considering this momentum, Bitcoin remains well-positioned to challenge the $80,000 mark before the end of November, especially if buying interest continues to drive the current uptrend.

Bitcoin price chart from Tradingview.com — BTC price above $74,000 | Source: BTCUSD on Tradingview.com

Featured image created with Dall.E, chart from Tradingview.com

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Bitcoin

Bitcoin Price After US Presidential Elections: Here’s How BTC Reacted To Previous Winners

Published

1 day ago

November 6, 2024

Coin2049 Newsletter

Market analysts have continued to deliberate on how the Bitcoin price could react to a Donald Trump or Kamala Harris victory in the US presidential elections. History indicates that Bitcoin’s future trajectory is bullish, irrespective of who wins the elections.

How The Bitcoin Price Has Reacted To Previous Winners

The Bitcoin price has always hit a new all-time high (ATH) regardless of the winners in the past US presidential elections. In 2012, after Barack Obama won the elections, Bitcoin rallied and reached a new ATH of $1,200 in 2013. Its price then consolidated until the next election in 2016.

The 2016 US presidential elections, which Donald Trump won, also sparked the beginning of another impressive rally for the Bitcoin price, which rose to a new ATH of $19,000 the following year. In 2020, following Joe Biden’s victory in the US presidential election, BTC rose to a new ATH of $69,000.

The Bitcoin price rally after the US presidential elections is believed to be due to the market certainty that the election aftermath provides. Meanwhile, based on history, the BTC rally could begin as soon as December, with the flagship crypto hitting a new ATH as soon as January 2024.

In 2016, the Bitcoin price rally began about three weeks before the election and went on to hit a new high in the first week of January 2017. In 2020, BTC had also consolidated for about six months before it began to rally from $11,000 just about three weeks before the US elections and then went on to reach a new high of $42,000 in January 2021.

Bitcoin’s recent price action also looks to be playing out the same way as BTC began rallying in mid-October and even came close to hitting its current ATH of $73,700 late last month. As such, there is the possibility that the flagship crypto could again retest this ATH and surpass it as soon as January 2024 or even before then.

There Could Be Some Volatility In The Coming Days

In an X post, Crypto analyst Ali Martinez warned that the days following the last three US presidential elections have been volatile for the Bitcoin price. However, he added that the overall trend has stayed upward.

Economist and crypto analyst Alex Krüger also warned about the potential pullback the Bitcoin price could face after the US elections. He claimed that there is a 45% chance that BTC could drop to as low as $65,000 if Kamala Harris wins the elections.

Due to his pro-crypto stance, Donald Trump looks to be the most preferred candidate in the crypto community. As such, the market could initially react negatively to a Harris win while taking in Trump’s loss.

At the time of writing, the Bitcoin price is trading at around $68,000, down in the last 24 hours, according to data from CoinMarketCap.