The middle week of February begins with a sign of weakness for the digital asset market, with today’s price of Bitcoin, Ethereum and most crypto assets ending the second consecutive week in negative territory.
This downtrend was influenced by a number of factors, including the shadow cast over the Federal Reserve’s future moves by the recent unemployment data released in January.
The Fed has raised its benchmark federal-funds rate by 4.5% since last March, most recently in a range of 4.5% to 4.75%. This is the fastest pace since the early 1980s, and many economists predicted it would be a drag on investment and hiring.
Instead, the hiring has continued recently. The Labor Department reported this month that employers added as many as 517,000 jobs in January and that the unemployment rate fell to 3.4%. Job openings in December increased.
Economist strategists working closely with the market are beginning to assess the possibility that the US economy may not experience a landing in the first quarter of 2023. This scenario could force the central bank to change its monetary policy.
The surprising strength in consumer hiring and spending last month, along with signs that demand for cars and homes is likely to stabilize after a decline, have some economists now pointing to a third scenario that seemed unlikely just a few weeks ago: an increase in economic growth.
January macro reports shocked forecasters because earlier releases had suggested that rising interest rates were beginning to dampen hiring, said Marc Giannoni, chief US economist at Barclays.
The latest figures suggest that Fed policy “has gained less grip on labor demand than we expected,” he said.
“A ‘no-landing’ scenario is a current reality,” said Neil Dutta, economist at research firm Renaissance Macro. While many Fed officials have said they still expect an economic slowdown this year, Mr. Dutta said he sees “a great reluctance to admit the obvious, which is that the economy is re-accelerating, period.”
During his speech last week at the Economic Club of Washington, Fed Chairman Jerome Powell hinted that if more positive data on the economy comes out, the central bank may be forced to continue raising interest rates.
Summary
The price of Bitcoin and Ethereum today influenced by the real economy
Uncertainty about the future has always been a threat to stock markets, and any change in monetary policy could force investors to revise their predictions.
After a positive start to the year with strong rises in stock and crypto markets, doubts influenced by macroeconomic data are beginning to increase. However, these doubts could be quickly dispelled with the release of the new unemployment data expected in early March.
The next important piece of data that investors are anxiously awaiting is the US Consumer Price Index (CPI), due tomorrow. This data, being one of the main inflation indicators, is an important test for markets and will help to understand the next moves of the US Central Bank.
Should the data differ from expectations, it could have a significant impact on stock market assets and the prices of many crypto assets, particularly Bitcoin.
The CPI figure is expected to fall, with a forecast of a decline from 6.5% to 6.2%, whereas the monthly Core CPI is expected to rise by 0.4%, which would drop the annual Core CPI from 5.7% to 5.5%. This macro data is particularly being monitored by the Fed board to assess its interest rate strategies.
If the CPI figure is in line with expectations, i.e., around 0.5% for the month of January, markets could continue to deflate prices as has happened over the past two weeks. This could be due to the perception that moderate inflation does not require immediate action by the Fed.
In general, the CPI figure is an important factor for investors and financial market participants, as it provides an indication of price stability and the strength of the economy.
Inflation that is too high can lead to higher interest rates and reduced demand, while inflation that is too low can indicate a weak economy and low growth.
Ultimately, the CPI figure will be closely monitored by the financial market and the Fed to assess the implications on monetary policy and to make informed decisions on investments and trading strategies.
Bitcoin (BTC)
Bitcoin breaks the period of euphoria by ending the week in the red for the second consecutive time, as it has not done since last September.
After touching a new record high of $24,200 earlier this month, Bitcoin’s price is currently posting an 11% loss from its yearly highs.
Technical analysis suggests that the cyclical structure remains unchanged and in line with the close of the monthly cycle. However, should the analysis be confirmed, the release of US macroeconomic data scheduled for tomorrow could be an opportunity to start a new monthly cycle.
Conversely, should the analysis fail, a further decline in the price of Bitcoin could be expected, with the next bearish target possibly being the crucial $20,300 zone.
At the moment, the cyclical structure remains unchanged and perfectly in line with the closing of the monthly cycle assumed in these hours.
Should this analysis be confirmed, tomorrow’s release of US macro data should be the pretext to start the new monthly cycle. If not, it will be necessary to start evaluating the second hypothesis and of a bearish continuation that sets the next bearish target in the crucial area of $20,300 that joins the 50% Fibonacci retracement with the only support area built in mid-January during the unbridled run at the beginning of the year.
Ethereum (ETH)
The queen of altcoins Ethereum is currently going through a rough patch, with a decline pushing prices below Friday’s lows, a technical condition that did not occur for Bitcoin, undoing last month’s rise.
The price of ETH hit its low of $1,460 last 14 January, reaching new period highs at $1,704 earlier this month. However, it is now again within a step of $1,450, the area of the 50% Fibonacci retracements calculated with the low and high prices of the past 2 months.
For Ethereum, it becomes crucial not to fall below the $1,450 support in the coming days, in order not to undo the work done so far and start building a solid base from which to restart towards new highs.
Conversely, a break of $1,450 could trigger bearish speculation and lead to a possible test of the next support in the $1,320 USD area.
Ethereum’s situation remains uncertain, and it will be important to monitor price movements in the coming days to see whether or not the $1,450 support will be a valid level to hold.
