This week will again bring important macroeconomic data to the Bitcoin and crypto markets. Investors should be aware of this. While Bitcoin has been able to maintain a positive correlation with the S&P 500, and the Dollar Indexing recent week’s, it is probable that the Federal Reserve will continue to have an impact on crypto.
Even though the week has started quiet, there are two macro events this coming week that could prove to be important. The U.S. stock exchange opens with a day off because of Presidents’ Day. Quarterly earnings will continue Tuesday through Friday.
Major retailers will be able to test the strength and viability of the U.S. stock exchange rally over the coming week. Investors can get a glimpse at the health of consumer spending as well as the effect of inflation on corporate profits. Walmart and Home Depot will publish their reports on Tuesday.
What’s the Deal with Bitcoin Rally?
The FOMC Minutes will be the first major event on Wednesday, 22 January at 2:00 EST. This report provides detailed information on the FOMC meeting February 1 and offers insights into the financial and economic conditions that influenced interest rate voting.
Investors in Bitcoin and financial services will be paying more attention this time around. Last week, several Fed speakers stated that the rate decision was not unanimous. They supported a 50 basis-point increase. Also, there were elevated CPI revisions last week and a strong January report.
Some voices believe that the Fed could use these minutes to make some sly corrections based on the negative data. The Fed Minutes could indicate an imminent rate hike that could sabotage the financial markets.
Powell also indicated that the minutes would provide information about how the Fed will decide when it will pause its rate-hike cycle. This is an important data point for financial market investors.
The Fed will likely request multi-monthly inflation data. This signals that it is on track to reach its 2% target. The Fed will now be focusing on the tight labor market as wage pressures are not compatible for a 2% inflation rate.
Bitcoin investors should be paying attention to the FOMC Minutes to see if Fed increases its hawkish stance. The recent Bitcoin decoupling will likely be tested.
The release of the core PCE price index, the second major event in the week , will be the second. Because it is more accurate than the Consumer Price Index, the PCE price index (Federal Reserve’s preferred measure for inflation) reflects consumers spending habits in a quicker manner than the CPI.
Core is the absence of volatile or seasonal prices for food and energy, which is not included in the PCE. The Core PCE has dropped from 5.1% to 4.4% over the past year, most recently in January.
It is now expected that it will have increased 0.4% in January from 0.3% in December, and 4.3% YoY. If the PCE surprises negatively and it exceeds expectations, then fears of sticky inflation will likely become stronger. This could also put a damper in the Bitcoin price.
After being rejected again at the critical resistance of $25,223, Bitcoin’s price was at $24,520 at press time.