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It is during Asian hours, that Bitcoin dropped below $66,500. For the first time since mid-November, the dollar index increased above 105.00. The unexpected acceleration of U.S. manufacturing activity in March was revealed by data released on Monday.
The likelihood of a June Fed rate cut fell below 50% following the manufacturing report.
Tuesday’s Asian trading hours saw selling pressure on Bitcoin (BTC) as positive U.S. industrial data caused the dollar index (DXY) to rise to its highest level since mid-November.
The top cryptocurrency by market capitalization dropped 4% to $66,342, capping a negative consolidation week between $68,000 and $72,000.
The whole cryptocurrency market saw losses, with more notable declines seen in Ether (ETH), Solana’s SOL, and Dogecoin (DOGE). Concurrently, there was an almost 8% decline in the wider CoinDesk 20 index.
Over four months, the dollar index—which measures the value of the US dollar relative to major fiat currencies—broke above 105 for the first time, increasing the four-week gain to 2.58%.
A stronger dollar raises the price of dollar-denominated assets, such as gold and Bitcoin, and may cause demand to decline. Moreover, it is commonly known that sustained dollar strength causes a tightening of global financial conditions, hence decreasing investors’ inclination to assume risk.
In February, the PMI was 47.8, but last month it increased by 2.5 points to 50.3. The headline number stopped 16 months of decline and moved over 50, undermining the rationale for a rate decrease by the Federal Reserve.
The pricing index surged to 55.8%, up 3.3 percentage points from the reading of 52.5% in February, while the new orders indicator also returned to expansion territory.
The manufacturing purchasing manager’s index (PMI) for the Institute for Supply Management (ISM) was issued on Monday. It revealed that industrial activity surprisingly increased in March, marking the first increase since September 2022.
After the manufacturing report, Bloomberg reports that the amount of Fed rate cuts priced into swap futures for this year has decreased to less than 65 basis points. Put differently, the market now anticipates that the Fed will rescind its prediction of three rate reductions of 25 basis points in 2024.
There is now less than 50% chance that the Fed will announce its first rate lowering in June.
Though 10Y Treasury yields have increased by 10 basis points due to the sector’s stronger inflation readings and the return of manufacturing growth, markets are mostly focused on the ISM data.
This week features over 20 separate speeches by the Federal Reserve, and analysts at ING wrote in a note to clients on Monday that “the market is likely thinking that officials will be wary of committing to significant policy easing today.”
However, other analysts think the Fed would eventually be forced to decrease rates quickly due to the growing national debt, which would provide a significant positive tailwind for cryptocurrency prices.
To control inflation, the Fed hiked interest rates from zero to 5.5% in 16 months, ending in July 2023. The alleged tightening contributed to the 2022 Bitcoin price collapse of 80%.
With multiple job statistics coming out this week, including the unemployment rate and Friday’s nonfarm payrolls figure, it looks like Bitcoin will stay volatile for a while. Moreover, this month’s quadrennial mining reward halving for the Bitcoin blockchain is approaching.
- Published By Team Genuine Reporter