Here’s What Will Be Crucial For Bitcoin And Crypto This Week
The Bitcoin and crypto market suffered a pullback in early trading in Asia. BTC price briefly dropped 2.2% and initially stabilized above $27,700 at press time. The broader crypto market has followed suit and is also in the red.
The reason for the drop in price is probably the news that members of the oil alliance OPEC+ announced a surprise cut in oil production on Sunday. Led by Saudi Arabia, which wants to produce 500,000 barrels a day less, production will be reduced by a total of one million barrels a day starting in May.
As a result, the price of Brent crude rose over $5 a barrel, or 7%, to above $85 in early trading, potentially putting more pressure on inflation. As macro analyst Alex Krueger explained, there is a rule of thumb that a $10 increase in oil prices leads to a 0.2% increase in inflation.
As a general rule of thumb, a $10 increase in crude oil leads to a 0.2% increase in inflation and a 0.1% hit to growth.
– Jerome Powell (Mar/2022)
— Alex Krüger (@krugermacro) April 3, 2023
As a result, the US dollar started the week higher. Inflation fears could lead to expectations that the Fed is not done and will have to raise interest rates in May – especially as US President Biden has already heavily used the Strategic Petroleum Reserve (SPR) in recent months.
Therefore, all eyes will likely be on the Dollar Index (DXY) on Monday. If the DXY continues to rise on fears of inflation and rising interest rates, it could be a significant headwind for Bitcoin and the entire cryptocurrency market.
A look at the 4-hour chart of DXY shows that the index is breaking out of a bearish trend. If this is confirmed, stocks and the financial market in general should start the session in the red.
For Bitcoin, it is once again about showing resilience. Bitcoin drops to the $25,000 mark because rising oil prices mean more inflation and higher interest rates, or it rises because it means the Federal Reserve’s monetary policy will lead to more bank failures and new bank runs.
Key Macro Data for Bitcoin and Cryptocurrencies
The trading week leading up to the Easter break contains some macro data that could have an impact on Bitcoin and the entire cryptocurrency 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 weakened index at 47.5. In February, the index was already below the forecast of 48.0 at 47.7. In response, DXY trended lower, while Bitcoin was able to benefit from the weakness of the US Dollar index on this day.
On Tuesday, April 4th at 10:00 am EST, the JOLTS jobs report will be released. The latest estimate is 10.40 million jobs, compared to 10.82 million in the previous month. If the US economy remains strong (a number above expectations), US stock indices should react positively. In recent months, financial markets have reacted favorably to a resilient JOLT report, something Bitcoin could also benefit from.
On Wednesday, April 5 at 10:00 am EST, the latest Purchasing Managers’ Index (PMI) for the US service sector will be released. The February reading came in at 55.1, again above expectations (at 54.5). Consequently, the stock market and the cryptocurrency market were rising. If the 54.5 estimate is topped once more, investors will likely continue to view this positively.
On Friday, April 7 at 8:30 am EST, the US Bureau of Labor Statistics will publish the US Labor Market Report (NFP) and the latest US unemployment numbers despite the holiday and Wall Street shutdown. . Expert estimates are for 213,000 new jobs created (significantly down from the 265,000 jobs created in February).
Both data points could fuel fears of a recession or mitigate them. In the latter case, it would be positive for both financial markets and Bitcoin. If the NFP forecast is topped for the seventh straight month, a positive reaction in financial markets can be expected. The US jobless rate is forecast at 3.6%, after rising from 3.4% to 3.6% in February.
At press time, BTC price was trading at $27,720, struggling to hold support at $26,670.
Featured Image from iStock, Charts from TradingView.com