In the complex dance of global finance, traditional economic indicators and the growing bitcoin and crypto markets are increasingly intertwined. Recent macroeconomic data from the US suggests that the economy is slowing down, and this could have a profound effect on bitcoin and other cryptocurrencies.
Macro Data Snapshot: A Freezing US Economy
Yesterday’s data release paints a clear picture of the slowing US economy:
- Job openings: The July JOLTS report indicated a significant decline in job openings, falling to 8.827 million from the previous 9.165 million, and notably lower than the expected 9.5 million.
- US ADP Non-Farm Employment Change (Aug): Actuals came in at 177K, missing the estimate of 195K and showing a sharp decline from the previous 324K.
- US GDP (QoQ) (Q2): Real growth was 2.1%, slightly below the estimated 2.4% and slightly above the previous 2.0%.
- PCE prices (Q2): The actual figure was 2.5%, slightly below the 2.6% estimate and a significant decline from the previous 4.1%.
- Core PCE prices (Q2): Actual data showed 3.7%, well below the 3.8% estimate and down from the previous 4.9%.
- Real consumer spending (Q2): The actual figure was 1.7%, slightly above the 1.6% estimate and down from the previous 4.2%.
- Pending home sales (July): The month-on-month data showed an increase of 0.9% defying the -0.60% estimate.
- Pending Home Sales Index (July): The index stood at 77.6, marginally up from the previous 76.9.
Implications for bitcoin and crypto
As recent macro data indicates, the cooling US economy could be setting the stage for an (eventual) significant bounce in BTC and crypto prices before a recession. Why? Because bad news is good news for the currently myopic financial world. Bad data means the US Federal Reserve will not raise interest rates any further and quantitative easing (QE) is drawing closer. Long term consequences in the form of recession are being ignored.
Joe Consorti, a renowned bitcoin layer analyst, Thrown light on Significant drop in job opportunities and slow job growth in August. He said, “Job vacancies in the US are 8.827 million, which is the lowest level since September 2021. Worse, last month’s figures were grossly exaggerated.” Cracks in the labor market are widening. The impact of the rate hike is finally taking effect.
Emphasizing the paradox of weak economic data driving the stock market rally, he suggested, “For the time being, bad news is good news. The poor data brought relief to investors’ fears of a tighter Fed — igniting hopes of softer policy to support asset prices. I don’t make the rules.”
michael van de poppe go deep Dive deeper into the correlation between traditional economic indicators and bitcoin’s performance. According to him, it is most likely that there will be no rate hikes now, as dire economic data is coming in, due to which gold, silver and bitcoin will go up.
He pointed to the inverse correlation between the yield markets and bitcoin, suggesting that as yields show signs of peaking, bitcoin may be ready to bounce. Van de Poppe said, “The 2-year yield is even more pronounced than the 10-year yield, indicating a possible top.
He pointed out that the previous top in November 2018 represents a low for bitcoin. BTC later broke down, but the yield top resulted in a bear market bottom for bitcoin. Continued selling in yields further strengthened bitcoin markets. Van de Poppe said:
The first real high in November 2022 also marked a low for bitcoin. And the last time we saw a substantial sell off in the markets for Yield (March ’23) the bitcoin price started to rise significantly.
Macro analyst Mortensen Bach also predicts for the next 6-10 months suggestion of Potential bearish for USD, lower in rates, and bullish for both stocks and crypto. According to him, the era of expansion of financial markets is coming to an end. However, there is one last step left for the markets.
Although he believes the soft landing story to be nonsense, he warned about the consequences of the Federal Reserve’s aggressive rate hikes, saying, “The FED will do more in 12 months to try to manipulate the economy into calming down.” Rates have been increased by 500bp. It was a big mistake and we will pay the price probably in 2024.
Crypto trader Dan stressed on fears of an impending recession and the possibility of rate cuts and increased money printing in the near future. He remarked, “The specter of a recession will soon be all over the media. Cut the rate and start printing money! (Not now but suspect it will take more than ~6 months).”
At press time, BTC is trading at $27,264.
Featured Image from iStock, Chart from Tradingview.com