Michael van de Poppe, founder and CEO of MN Trading, has characterized the recent Bitcoin movement as “terrible” and assessed the events leading up to it.
Consumer Price Index figures are due on Wednesday.
The primary factor that the Federal Reserve considers when deciding on interest rates was the release of consumer price index (CPI) data on Wednesday. The consumer price index came in at 3.3%, lower than the predicted 3.4%. There was a positive change when compared to the previous month as well: 0% versus the expected 0.1%.
Since this information raises the possibility of a rate cut, it is favorable to risky assets.
Thursday: Retail Price Index figures
The data from the Producer Price Index (PPI), which shows inflation from the point of view of producers, was the subsequent significant development. The actual index value was 2.2% lower than the predicted 2.5%. Additionally, the monthly change was positive, coming in at -0.2% instead of the predicted 0.1%.
Customer Confidence Index (CSU) on Friday
Since it was lower than expected, the consumer sentiment index also sent a positive signal (from the perspective of risky assets). The result was 65.6, which was lower than the expected value of 72.1, for this indicator, which has a range of 0 to 100.
This points to a decelerating economy that is being impacted by elevated Fed rates.
But bad things happened this week as well.
Press conference with Powell
Investors and traders are feeling relaxed because of positive macroeconomic data. On Wednesday night, though, Jerome Powell delivered one of the most combative speeches in recent memory. Inflation is falling and the economy is getting worse, so this doesn’t make much sense and points to the necessity of a rate cut.
Also, the amount of payments for the US government debt grows with each passing day, depending on the rate. Last but not least, loosening fiscal policy is ideal during election years.
The amount of rate cuts planned for 2024 was revised down, though, as Powell struck a hawkish tone. The cryptocurrency market is not looking good with these prospects.
The expansion of the dollar index
Despite US Treasury yields hitting a two-month low of 4.694% this week, the dollar has strengthened. May saw a peak of 5.00%, which is in line with the real Bitcoin market low of $58,000.
A decline in European interest rates was the sole factor that could explain the dollar index’s resurgence to 105.75 points.
Due to the European Central Bank’s decision to lower interest rates two weeks ago, the market viewed the US dollar as a more powerful currency than the euro. This was further supported by rate cuts by the central banks of Switzerland, Canada, and Sweden.
So, what comes up after this?
To keep the US economy from entering a recession, a rate cut is actually required.
Even Yellen has demanded a rate cut, and Powell is systematically ruining the economy.
The launch of an Ethereum ETF has not been finalized yet, and until this is confirmed, the cryptocurrency market may continue to exhibit weakness.
When the Ethereum-ETF is officially greenlit, it’s likely that the cryptocurrency market will experience a “sell rumors, buy news” scenario.
Everything needed for a macroeconomic boom is already in place. A rate reduction is imminent.
“I anticipate a great deal from the upcoming weeks,” says Van de Poppe in summary. In my opinion, the market will experience another down week before continuing its upward trajectory.