Volatility has hit our beloved crypto market again. Bitcoin and Ethereum suffered significant losses following the Bank of Japan’s announcement of a 0.25% rate hike. But let’s not just blame our Japanese friends, other economic factors are also at play. Let’s explore the key events that could shake up the crypto market this week.
Economic events that will fan the flames
Bitcoin has fallen drastically, but the week promises to be tumultuous for the crypto market. Of many economic events could disturb the peace of investors.
S&P Final US Services PMI: A positive signal for traditional markets
On Monday, attention will turn to the S&P Global Services PMI, which includes sectors such as finance, insurance, real estate and business services.
In July, This PMI exceeded expectationsclimbing to 56 points from 55.3 in June, indicating an expansion in the services sector. This growth suggests increased demand for servicesa good omen for traditional markets that could also positively influence the crypto market.
As the saying goes, a good wind is blowing on the markets, let's take advantage of it before the breeze changes!
The US Trade Deficit: An Indirect Influence on Crypto
On Tuesday, the US trade deficit will reveal its secrets. In June, This deficit showed an increase in exports of services and carsreporting a more service-oriented economy.
Ram Ahluwalia, CEO of Lumida Wealth, says that This transition could create new investment opportunities and improve economic conditions.
A healthy economy could encourage investors to take risks, which could potentially benefit cryptocurrencies. After all, when the cat is fat, the mice will play!
Consumer Credit: An Indicator of Economic Confidence
On Wednesday, June consumer credit data will be in the spotlight. In May, This credit increased at an annual rate of 2.7%with a 6.3% increase for revolving credit.
It shows increased consumer confidence and willingness to take on debtgenerally a good sign for the economy.
If June data shows similar trends, it could boost economic activity and corporate profits, strengthening stock markets.
However, High credit levels carry risks of defaults and financial instabilitywhich could increase volatility in traditional financial markets and, in turn, benefit the crypto market.
Tom Barkin's Speech: The Outlook for Monetary Policy
On Thursday, Richmond Fed President Tom Barkin will share his views on the outlook for monetary policy, a speech that could influence traditional markets and the crypto industry.
The Federal Reserve has maintained its interest rates at 5.25% – 5.50% for the eighth consecutive meeting. Fed Chairman Jerome Powell expressed cautious optimism about progress in disinflation in the second half of 2024, without announcing an imminent rate cut.
However, some personalities like Elon Musk criticize Fed's reluctance to cut ratesespecially after a disappointing jobs report. It seems that great minds do not always agree on the way forward.
Macroeconomic Effects: The Crypto Selloff
The crypto market is facing high volatility, with a 12% drop in total capitalizationBitcoin fell 15% to $51,400, while ethereum lost 21%.
Some analysts attribute this crash to Japanese stock market suffered its worst losses since 1987.
Market analyst Zach Jones attributes the decline to Japan's defense of its currency, the Yen, by selling its holdings of U.S. Treasury bonds.
According to Jones, Japan had to choose between letting its currency collapse or printing money to defend itultimately opting for the second option. As such, even large economies sometimes have to choose between a rock and a hard place.
Despite the falls, investors, including whales, remain hopeful and are closely monitoring the comeback of their favorite cryptos. The next few days promise to be decisive for the future of the crypto market.
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