Navigating Market Waves: Key US Economic Indicators and the Dance of Bitcoin Volatility

Participants in the cryptocurrency market have much to anticipate this week, with five US economic indicators set for release commencing Tuesday. The market is already buzzing, foreseeing the potential impact of these occurrences on Bitcoin (BTC) and the broader crypto landscape.

The effect of US macroeconomic data on Bitcoin remains evident following a period of subdued influence in 2023.

Consumer Confidence

The first US economic occurrence with implications for crypto this week is the consumer confidence survey on Tuesday, January 28. This survey reflects expected spending habits, highlighting consumer sentiments, buying behaviors, and travel plans, among other factors.

A median prediction stands at 106.3 following the previous figure of 104.7. An increase in consumer confidence would indicate that individuals are more willing to spend, thus enhancing economic activity. This could potentially channel more investments into digital currencies like Bitcoin.

On the other hand, a decline in consumer confidence might result in lower spending and investment. It could support a more accommodating trajectory for the Federal Reserve (Fed), yielding greater liquidity within the financial framework.

This scenario might benefit Bitcoin as investors look for alternative stores of value and defenses against inflation. Hence, the Tuesday data will play a crucial role for crypto markets, gauging how optimistic or pessimistic consumers feel regarding the economy’s overall health.

FOMC and Fed Chair’s Address

In addition to consumer confidence, crypto enthusiasts are closely monitoring the Federal Open Market Committee (FOMC) interest rate announcement on Wednesday, January 29. This event represents the first FOMC decision since President Donald Trump’s inauguration, making it particularly noteworthy.

“Trump is pushing for rate reductions, yet Powell is indicating no changes. This clash could shake the markets,” remarked crypto trader Roger Smith.

Officials have recently raised alarms regarding inflationary pressures, particularly related to Trump’s proposed fiscal strategies. During their last assembly, FOMC minutes offered little signal of a possible rate reduction soon, reinforcing the Fed’s hawkish position. As reported by BeInCrypto, this perspective has placed downward pressure on risk assets, including cryptocurrencies.

In this context, the CME FedWatch tool indicates a 99.5% likelihood of a 25-basis-point (0.5% bps) rate cut. Should this denote no rate modifications, attention will pivot to the press briefing with Fed Chair Jerome Powell. As a result, traders and investors are anticipating heightened volatility amid significant insights from the Fed chair.

“I’ll evaluate that after Wednesday, January 29, 2024, FOMC interest-rate decision at 2:00 pm ET – Fed Chair Powell press briefing at 2:30 pm ET. Currently, no position, but I perceive a slight possibility for positivity,” one trader remarked.

Importantly, the Fed has a dual mandate — to ensure the Consumer Price Index (CPI), a benchmark of inflation, rises by 2% annually and to sustain full employment across the economy.

GDP

The US GDP (Gross Domestic Product) report is expected on Thursday, January 30, further contributing to the list of US economic indicators to scrutinize this week. The median estimate is 2.5%, down from the prior reading of 3.1%. This data gauges the total value of goods and services produced within a nation.

An upward revision of GDP could indicate a robust and expanding economy. This may encourage investors to direct more resources toward riskier assets like Bitcoin and cryptocurrencies. Conversely, a downward adjustment could result in a shift in investor sentiment, potentially causing a temporary drop in crypto prices.

Initial Jobless Claims

Crypto markets will also keep a close eye on the initial jobless claims report on Thursday, which will shed light on the state of the US labor market. Notably, the number of Americans submitting new claims for unemployment benefits has recently risen. However, it seems to be stabilizing near levels indicative of a gradual cooling labor market. This has established the groundwork for the Fed’s readiness to consider rate cuts.

The prior data registered 223,000, with a current median expectation of 225,000. A higher-than-anticipated jobless claims figure could signify economic volatility and unpredictability. Consequently, this may drive investors to seek alternative assets such as Bitcoin as a hedge against traditional markets.

Conversely, a decline in jobless claims might enhance investor confidence in conventional markets, potentially reallocating funds away from cryptocurrencies. Fed officials are also mindful of the labor market, aware of the dangers of delaying rate cuts too long.

Personal Income and PCE Index

The US Bureau of Economic Analysis (BEA) will unveil the personal income, expenditure, PCE index, and core PCE on Friday. Diminished personal income and spending, along with softer inflation metrics, could indicate a deceleration in economic momentum.

In response, the Federal Reserve may contemplate pausing interest rates to encourage borrowing and expenditure, thereby stimulating economic expansion.

Furthermore, the Personal Consumption Expenditures (PCE) index, omitting volatile food and energy rates, will serve as a critical gauge of inflation. An unexpectedly high core PCE index could reflect increasing inflationary pressures.

This would drive investors to diversify their portfolios by allocating funds to assetssuch as Bitcoin, perceived as a shield against inflation. Conversely, a lower core PCE index could result in diminished demand for cryptocurrencies as investors gravitate toward more stable investment opportunities.

In anticipation of these US economic indicators, BeInCrypto’s data demonstrates that BTC was trading at $100,355, reflecting a decline of nearly 5% since the opening of Monday’s trading session.