US Economic Data to Watch: Bitcoin Volatility Expected

Crypto market participants have a lot to look forward to this week, with 5 US economic data due for release starting Tuesday. The market is already abuzz, anticipating the implication of these events on Bitcoin (BTC) and crypto markets in general.

The influence of US macro data on Bitcoin continues to remain apparent after a period of dissipated or dried-up effect in 2023.

Consumer Confidence

The first US economic event with crypto implications this week is the consumer confidence survey on Tuesday, January 28. This survey reflects likely spending trends, showcasing consumer attitudes, buying intentions, and vacation plans, among other things.

There is a median forecast of 106.3 after the previous 104.7. Enhanced consumer confidence would suggest that people are open to spending more money, hence increasing economic activity. This would potentially drive more investments into cryptocurrencies like Bitcoin.

Conversely, a pullback in consumer confidence could lead to decreased spending and investment. It would support a more dovish path for the Federal Reserve (Fed), leading to increased liquidity in the financial system.

This may be favorable for Bitcoin as investors seek alternative stores of value and hedges against inflation. Therefore, the Tuesday data will be important for crypto markets, measuring how optimistic or pessimistic consumers are about the overall state of the economy.

FOMC and Fed Chair’s Speech

Beyond consumer confidence, crypto markets are also watching the Federal Open Market Committee (FOMC) interest rate decision on Wednesday, January 29. It marks the first FOMC decision after President Donald Trump took office, making it an interesting watch.

“Trump is demanding rate cuts, but Powell’s signaling no change. This showdown could rock the markets,” crypto trader Roger Smith quipped.

Policymakers recently expressed concerns about inflationary pressures, particularly tied to Trump’s proposed fiscal policies. During their last meeting, FOMC minutes provided little indication of a potential rate cut in the near term, further solidifying the Fed’s hawkish stance. As BeInCrypto reported, this stance exerted downward pressure on risk assets, including cryptocurrencies.

Against this backdrop, the CME FedWatch tool shows a 99.5% probability of a 25-basis-point (0.5% bps) rate cut. As this would signify a no rate change, the focus will be on the press conference with Fed Chair Jerome Powell. With these, traders and investors are expecting higher volatility amid market-moving insights from the Fed chair.

“I’ll decide that after Wednesday, January 29, 2024, FOMC interest-rate decision 2:00 pm ET – Fed Chair Powell press conference 2:30 pm ET. No position at the moment but I see a small chance for positive,” one trader said.

Noteworthy, the Fed has a dual mandate — to keep the Consumer Price Index (CPI), a measure of inflation, increasing by 2% per year and to maintain full employment in the economy.

GDP

The US GDP (Gross Domestic Data) report will be out on Thursday, January 30, adding to the list of US economic data to watch this week. The median forecast is 2.5% after the previous reading of 3.1%. This data measures the total value of goods and services produced in a country.

A positive GDP revision could signal a strong and growing economy. This would prompt investors to allocate more capital towards riskier assets such as Bitcoin and cryptocurrencies. Conversely, a downward revision may lead to a shift in investor sentiment, resulting in a temporary decline in crypto prices.

Initial Jobless Claims

Crypto markets will also be keen on the initial jobless claims report on Thursday, which will provide insight into the health of the US labor market. Notably, the number of Americans filing new applications for unemployment benefits recently ticked up. However, it appeared to be steadying near a level consistent with a gradual cooling of the labor market. This is what set the stage for the Fed’s openness to rate cuts.

The previous data came in at 223,000, with a current middle projection of 225,000. A higher-than-expected number of jobless claims could indicate economic instability and uncertainty. In turn, this would lead investors to seek alternative assets like Bitcoin as a form of hedging against traditional markets.

On the other hand, a decrease in jobless claims could boost investor confidence in traditional markets, potentially diverting funds away from cryptocurrencies. Fed officials are also keen on the labor market, cognizant of the risks that come with waiting too long to cut rates.

Personal Income and PCE Index

The US Bureau of Economic Analysis (BEA) will release the personal income, spending, PCE index, and core PCE on Friday. Weaker personal income and spending, coupled with softer inflation figures, could signal a slowdown in economic activity.  

In response to this, the Federal Reserve may consider pausing interest rates to stimulate borrowing and spending and boost economic growth.  

Meanwhile, the Personal Consumption Expenditures (PCE) index, excluding volatile food and energy prices, will be a key indicator of inflation. A higher-than-expected core PCE index could indicate rising inflationary pressures.

This would prompt investors to diversify their portfolios by investing in assets like Bitcoin, which is seen as a hedge against inflation. Conversely, a lower core PCE index could lead to a decrease in demand for cryptocurrencies as investors flock to more stable investment options.

Ahead of these US economic events, BeInCrypto data shows BTC was trading for $100,355, down almost 5% since Monday’s session opened.