Bitcoin traders look to economic data to keep the crypto rally going
The price of Bitcoin has risen less than 1% in the past 24 hours to $28,600, with the biggest digital asset briefly surging above $29,100 in recent trading – the highest level since last June, when the crypto crash accelerated to a brutal bear market. Up from around $16,500 at the start of the year, Bitcoin’s rally has spurred a new bull market, with traders eyeing the psychologically important $30,000 level – where prices stood before June’s decline – for a green light.
“The positive sentiment of the stock market brought the price of Bitcoin back to the upper limit of the trading range for March,” said Alex Kuptsikevich, an analyst at the broker FxPro. “A potential upside target in the formation is the area near $35,000 … but already near $30,000, Bitcoin may face short-term selling pressure.”
In fact, Bitcoin has risen in line with stocks, rising along with them
Dow Jones Industrial Average
and
S&P 500
as investors shake off fears from a panic over the health of banks in recent weeks and look ahead to the inflation picture.
The macroeconomic backdrop – which has correlated crypto and stocks – continues to be key for Bitcoin, with traders shrugging off intense and growing regulatory headwinds against digital assets to focus on the outlook for interest rates. Higher prices dampen demand for more risk-sensitive assets such as crypto. The Federal Reserve has raised interest rates since last March in an attempt to curb decades of high inflation.
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Signs that inflation is cooling — along with concerns over the health of lenders, an unintended consequence of higher interest rates — have spurred bets that the Fed will be more accommodative with monetary policy and may even cut interest rates soon, boosting cryptos.
Data in the coming days could confirm, or shake, that narrative, with a third estimate of US gross domestic product (GDP) due Thursday ahead of the February personal consumption expenditures (PCE) index, which is the Fed’s preferred inflation gauge.
“Investors seem to be positioning themselves and their books ahead of some key data this week, namely GDP and PCE inflation data,” said James Lavish, managing partner of the Bitcoin Opportunity Fund.
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Bullish traders want to see both indicators come in weaker, Lavish said. The logic is that a weaker economy, which would be evidenced by a lower GDP print, could prompt the Fed to ease back on interest rate policy. Cooling PCE inflation could similarly lead to a dovish turn by the central bank, possibly confirming market pricing that the Fed will keep interest rates unchanged when the policy-setting committee meets in early May.
But that’s not all the risk.
“With the prospect of knock-on effects from the rapid increases still ahead, there is a significant likelihood that we either have another credit-like event or are headed straight for a recession,” Lavish said. “I personally am cautious about price here, and only add opportunistically.”
Beyond Bitcoin,
Ether
— the second-largest crypto — fell 1% to $1,800. Smaller cryptos or altcoins were weaker, with both
Cardano
and
Polygon
down 2%. It was more of the same for memeconis, too
Dogecoin
and
Shiba Inu
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reduction 2%.
Write to Jack Denton at [email protected]
