How Will This Week’s Macroeconomic Events Shape Crypto? – Analysis

Economic Indicators For The Week And Market Sentiments

As the new week unfolds, the cryptocurrency markets will grapple with a mix of economic indicators and internal market dynamics. Over the weekend, there was a decline in crypto prices due to the waning excitement surrounding the launch of spot Bitcoin Exchange-Traded Funds (ETFs) and a continued correction following a three-month rally.

PMI, GDP, And PCE Reports

A slew of critical macroeconomic events is scheduled for release in the United States this week. One of these events is the release of US quarterly GDP figures. On Wednesday, there will be a release of the Manufacturing Purchasing Manufacturer’s Index (PMI) and Services PMI report.

These reports capture business conditions in the manufacturing sector, contributing significantly to the overall GDP. Analysts closely watch the direction and rate of change in the PMIs, as they often precede changes in the broader economy, and expectations suggest a slight decline in the PMI.

Twenty-four hours after the PMI report release, there will be a release of the quarterly gross domestic product (GDP) report for the fourth quarter of 2023. The GDP (a comprehensive measure of US economic activity) reflects the nation’s overall economic health.

After a robust 4.9% growth in the third quarter, expectations are for a more moderate growth of around 1.8% in the fourth quarter. Then, on Friday, there will be a release of the Core Personal Consumption Expenditures (PCE) for last month.

This report explains the average monthly spending by consumers, excluding volatile products like food and energy. Central bank policymakers use the Core PCE Price Index to gauge inflation, and analysts expect a slight uptick in this index.

This week’s economic calendar also includes earnings reports from major firms, including Intel, Tesla, and Visa, releasing revenue data throughout the week. These reports contribute to overall market sentiments and can influence investment decisions in the traditional and crypto markets.

Despite the generally positive economic outlook, the crypto market remains relatively stable. The overall market evaluation remained at $1.71 trillion over the weekend. Bitcoin remained steady at $41,368 as of Sunday after the expiration of options on Friday, while many altcoins, including Cardano, Solana, Polkadot, and Dogecoin, experienced price drops.

Altcoins’ Price Surge After Spot Bitcoin ETF Launches

In the wake of the highly anticipated launch of spot Bitcoin exchange-traded funds (ETFs) earlier this month, a notable shift occurred in the broader crypto market dynamics. Altcoins have outperformed Bitcoin significantly, with BTC’s price dropping by 14%.

In contrast, altcoins have displayed resilience, recording some gains during this period. Analysts attribute this resilience to the changing dynamics in Bitcoin’s volatility, which is expected to decrease as institutional involvement grows.

Co-founder of Mechanism Capital, Andrew Kang, noted that while the launch of Bitcoin ETF benefits BTC, it holds greater potential for altcoins. Kang suggests that the decrease in BTC’s volatility will lead to slow and steady gains for its investors.

This scenario, often called the “Goldilocks scenario” for altcoins, is characterized by a gradual increase in Bitcoin prices over months and years with fewer double-digit intraday swings. Thus, Kang predicts that this scenario will lead to an upward trajectory for the entire crypto market, resulting in investments in higher-risk altcoins.