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Bitcoin and the crypto markets have suffered a downturn over the past 24 hours, with the price of BTC briefly falling 2.2% before stabilizing above $28,400 at press time. Just a brief setback – or the start of a downward spiral?
Bitcoin fails repeatedly at $30k
The possible reason for the price drop: the news that members of the OPEC+ oil alliance announced an unexpected reduction in oil production on Sunday. Led by Saudi Arabia, which plans to cut production by 500,000 barrels per day, production will be reduced by a total of one million barrels per day from May.
How soon does the US finish draining the SPR?
*SAUDI ARABIA TO CUT OIL OUTPUT BY 500,000 BARRELS PER DAY FROM MAY
*US OIL MAY CUT 6% IN ASIA AFTER OPEC+ EXPECTATIONS
(and what do we do when it’s empty and the reason for SPR really?) pic.twitter.com/XmxoFuGhZm
— Jim Bianco biancoresearch.eth (@biancoresearch) April 2, 2023
As a result, the price of Brent crude oil has risen in early trading — more than $5 a barrel, or 7%, to over $85. This could put further pressure on inflation.
Macro analyst Alex Krueger explains: The rule of thumb is that a $10 increase in oil prices will lead to a 0.2% increase in inflation. The result: the US dollar rose at the beginning of the week.
As a general rule, a $10 increase in crude oil leads to a 0.2% increase in inflation and a 0.1% increase in growth.
– Jerome Powell (March/2022)
— Alex Kruger (@krugermacro) April 3, 2023
It could be expected that the Fed is not done yet as a result of these inflationary concerns and that they will have to raise rates in May. Mainly because the President of the United States Biden has been tapping heavily on the Strategic Petroleum Reserve (SPR) in recent months.
So, all eyes are likely to be on the Dollar Index (DXY) this Monday. If the DXY continues to rise on fears of inflation and rate hikes, it should create significant upside for Bitcoin and the crypto market as a whole.
A look at the 4-hour chart of the DXY shows that the index is breaking out of a downtrend. If confirmed, stocks and the broader financial market are likely to start lower.
Once again, Bitcoin is all about showing resilience. Is Bitcoin falling towards $25,000 as rising oil prices mean more inflation and higher interest rates? Or will it rise because the Federal Reserve’s monetary policy will lead to more bank failures and more bank runs?
Important macro data for bitcoin and cryptocurrencies
The current week ahead of the Easter holidays has some important macro data – and it could have an impact on Bitcoin and the entire crypto market. For example, today, Monday, the ISM Purchasing Managers’ Index (PMI) will be released for manufacturing in the United States.
Experts expect the index to continue weakening at 47.5 for March. At 47.7 in February, it was already below the forecast of 48.0. In response, the DXY trended lower – although Bitcoin was able to benefit from weakness in the US Dollar Index on the day.
The JOLTS labor market report will also be presented tomorrow, Tuesday. The latest estimate is 10.40 million vacancies – up from 10.82 million in the previous month. If the US economy continues to be strong and inflows come in above expectations, US equity indices are also likely to react positively. In recent months, the financial market has reacted accordingly with a strong JOLTs report – which may also be driving Bitcoin up.
Finally, on Wednesday, the latest Purchasing Managers’ Indexes (PMI) for the US service sector will be released. In February, the reading was 55.1, again above expectations (54.5). Therefore, both the stock market and the crypto market increased. If the 54.5 estimate is breached again, investors should take a positive view of that as well.
On Friday, the US Bureau of Labor Statistics will publish the US labor market report (NFP) and the latest US unemployment figures – despite the holiday and the closing of Wall Street. Experts estimate that 213,000 new jobs will be created – a significant drop from 265,000 jobs in February.
Both dates could trigger or alleviate fears of a recession. In the latter case, it would be positive for both the financial markets and Bitcoin. If the NFP forecast is exceeded for the seventh month in a row, a positive reaction on the financial markets can be expected. The US unemployment rate is forecast at 3.6% after rising to 3.6% from 3.4% in February.
At press time, BTC price is trading at $28,200 after falling 0.28%.
Should you buy Bitcoin now?
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Text credit: Bitcoinist
Last updated on April 3, 2023
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