In the intricate dance of global finance, traditional economic indicators and the burgeoning bitcoin and crypto market are becoming ever more intertwined. Recent macroeconomic data from the US points to a slowdown in the economy, and this could have a profound impact on Bitcoin and other cryptocurrencies.
Macro data snapshot: A cooling US economy
Yesterday’s data releases paint a clear picture of a slowing US economy:
- Job Vacancies: The July JOLTS report indicated a sharp drop in job vacancies, which fell to 8.827 million from 9.165 million, well below the 9.5 million expected.
- US ADP Nonfarm Employment Change (August): Actual figure was 177k, missing estimate of 195k and showing a sharp drop from previous 324k.
- US GDP (QoQ) (Q2): The actual growth rate was 2.1%, slightly below the estimated 2.4% and just above the previous 2.0%.
- PCE Prices (Q2): Actual was 2.5%, slightly below the estimate of 2.6% and a significant drop from the previous 4.1%.
- Core PCE Prices (Q2): Actual data showed 3.7%, just below the estimate of 3.8% and lower than the previous 4.9%.
- Real Consumer Spending (Q2): The actual figure was 1.7%, slightly above the 1.6% estimate and below the previous 4.2%.
- Pending Home Sales (July): The monthly data showed a rise of 0.9%, beating the estimate of -0.60%.
- Pending Home Sales Index (July): The index came in at 77.6, slightly up from the previous 76.9.
Impact on Bitcoin and Crypto
The slowdown in the US economy, as suggested by recent macro data, could set the stage for a (last) significant rise in BTC and crypto prices before a recession. Why? Because bad news is good news for the currently short-sighted financial world. Bad data means the US Federal Reserve will not hike further and that quantitative easing (QE) is getting closer. The long-term consequences in the form of a recession are being overlooked.
Joe Consorti, a renowned Bitcoin Layer analyst, pointed to the significant drop in job vacancies and slowing job growth in August. He explained: “The number of job vacancies in the US stands at 8.827 million, the lowest level since September 2021. Worse – last month’s data was grossly overestimated. Cracks are spreading in the job market. The effects of the rate hikes are finally showing.”
He also stressed the paradox that weak economic data drives the stock market higher, saying, “Bad news is good news right now.” Bad data allays investors’ fears of a hawkish Fed – and raises hopes of loose policy support of asset prices. I don’t make the rules.”
Michaël van de Poppe delved deeper into the relationship between traditional economic indicators and Bitcoin’s performance. In his opinion, the most likely scenario is that there will be no more rate hikes as the economic data is horrible and gold, silver and bitcoin are going to rise.
He pointed to the inverse correlation between yield markets and bitcoin, suggesting that if yields show signs of a peak, bitcoin could be poised for a surge. “The 2-year returns are even clearer than the 10-year returns, suggesting a potential top is imminent,” said van de Poppe.
He explained that the previous peak in November 2018 marked Bitcoin’s bottom. After that, BTC collapsed, but the peak in yields led to the bottom of the Bitcoin bear market. The ongoing sell-off in yields led to more and more strength in the bitcoin markets. Van de Poppe added:
The first real high in November 2022 also marked Bitcoin’s low. And the last time there was a significant sell-off in yield markets (March 23), Bitcoin’s price started moving significantly higher.
Macro analyst Mortensen Bach’s forecasts for the next 6 to 10 months also point to a possible decline in the USD, a fall in interest rates and an uptrend in both stocks and cryptocurrencies. According to him, the expansion phase of the financial markets is coming to an end. However, there is one last pillar for the markets.
While he believes the soft-landing narrative is nonsense, he warned of the impact of the Federal Reserve’s aggressive rate hikes, stating, “The Fed has hiked rates by 500 basis points in 12 months to try to manipulate the economy to… it cools.” That was a big mistake and we will pay the price, probably in 2024.”
Crypto trader Daan emphasized looming recession fears and the potential for rate cuts and increased money printing in the near future. He commented: “Recession fears will soon be all over the media. Bring on interest rate cuts and money printing! (Not yet, but I doubt it will be much longer than about 6 months).”
At press time, BTC was trading at $27,264.
BTC price remains above 200D EMA, 1-day chart | Source: BTCUSD on TradingView.com
Selected image from iStock, chart from TradingView.com
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