Here’s what will be decisive for Bitcoin and crypto this week

Bitcoin and crypto markets saw a decline at the start of the trading session in Asia. The price of BTC briefly fell 2.2% and only stabilized above $27,700 at press time. The broader crypto market followed suit and is also in the red.

The reason for the price drop is probably the news that the members of the OPEC+ oil alliance announced a surprise cut in oil production on Sunday. Led by Saudi Arabia, which wants to produce 500,000 barrels per day less, production will be lower by a total of one million barrels per day from May.

As a result, the price of Brent crude rose more than $5 a barrel, or 7%, to more than $85 in early trade, potentially putting more pressure on inflation. As macro analyst Alex Krueger explained, a rule of thumb is that a $10 increase in oil prices leads to a 0.2% increase in inflation.

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As a rule of thumb, a $10 increase in crude oil leads to a 0.2% increase in inflation and 0.1% growth.

– Jerome Powell (March/2022)

— Alex Krüger (@krugermacro) 3 April 2023

As a result, the US dollar started the week higher. The fear of inflation may lead to expectations that the Fed is not finished after all and will have to raise interest rates in May – especially because US President Biden has already tapped heavily into the strategic petroleum reserve (SPR) in recent months.

Therefore, all eyes will likely be on the dollar index (DXY) on Monday. If DXY continues to rise due to fears of inflation and interest rate hikes, it could be a significant headwind for Bitcoin and the entire crypto market.

A look at the 4-hour chart of the DXY shows that the index is breaking out of a downtrend. If this is confirmed, stocks and the broader financial market are likely to start the session in the red.

For Bitcoin, it is once again about showing resilience. Is Bitcoin falling towards the $25,000 mark because a rising oil price means more inflation and higher interest rates, or is it rising because this means the Federal Reserve’s monetary policy will lead to more bank failures and renewed bank runs.

Key macro data for bitcoin and crypto

The trading week before the Easter holiday contains some macro data that may have an impact on Bitcoin and the entire crypto market. Today, Monday, the ISM Purchasing Managers’ Index (PMI) for the US manufacturing sector will be released at 10:00 AM EST.

For the month of March, experts expect a further weakening of the index to 47.5. In February, the index was already below the forecast of 48.0 at 47.7. In response, the DXY trended lower, while Bitcoin was able to benefit from the weakness of the US Dollar Index on the day.

Tuesday 4 April at At 10:00 AM EST, the JOLTS jobs report will be presented. The latest estimate is 10.40 million vacancies, up from 10.82 million the month before. If the US economy continues to perform strongly (a figure above expectations), US stock indices are likely to react positively. In recent months, the financial market has reacted positively to a resilient JOLTs report, which Bitcoin could also benefit from.

Wednesday 5 April at 10:00 AM EST, the latest Purchasing Managers’ Indexes (PMI) for the US service sector will be released. February’s reading came in at 55.1, again above expectations (at 54.5). Consequently, both the stock market and the crypto market were heading higher. If the estimate of 54.5 is exceeded once again, investors will likely continue to view this positively.

Friday the 7th April at At 8:30 am EST, the US Bureau of Labor Statistics will release the US Labor Market Report (NFP) and the latest US unemployment numbers, despite the holiday and closed Wall Street. Expert estimates are for 213,000 new jobs created (considerably down from 265,000 jobs created in February).

Both data points can either fuel fears of a recession or dampen them. In the latter case, it will be positive for both the financial markets and Bitcoin. If the NFP forecast is beaten for the seventh consecutive month, a positive reaction in the financial markets can be expected. The US unemployment rate is forecast at 3.6%, after rising from 3.4% to 3.6% in February.

At press time, the BTC price was trading at $27,720, struggling to hold the $26,670 support.

Featured image from iStock, charts from TradingView.com