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The crypto market looks to have navigated a rough patch after Bitcoin price recovered from its year-to-date lows. As the market moves towards February, optimism is returning and the overall outlook remains that 2024 could be a big year for the industry.

Tailwinds that analysts and market experts point to include Bitcoin’s upcoming halving, the steady inflows in spot Bitcoin ETFs and potential regulatory clarity and breakthroughs for the sector.

However, the short term picture for crypto, stocks and commodities is likely to feature an injection of volatility amid the changing macro environment.

Is it,

a)      the global economic outlook?

b)      central bank policy decisions (US, UK interest rates)?

c)       geopolitical tensions? – the volatile situation in the Middle East?

One of the key events investors will be keen on this week is the FOMC meeting on January 29 and 30. While the market expects the Fed to hold interest rates, commentary from the Federal Reserve chair Jerome Powell after the meeting will be key.

With projections for interest cuts in the mix, Bitcoin prices rallied into December and early this year – helped by sentiment around the approval of spot ETFs. As low rates favour risk appetite, crypto has performed well in such environments.

Currently, the market is pricing in a less than 50% chance that the Fed cuts rates in March. In this context, Powell’s language will very much give a strong indication to the central bank’s thinking.

A similar focus will be on the UK’s central bank. With the European Central Bank (ECB)’s recent decision as well as Canada’s in the picture, analysts are suggesting there could be swings in volatility. A short term drag as investors readjust their expectations could include a slight pullback for recently rallying stock indices.

Crypto investors might have to take this into account.

Tied to the above is the global economic outlook, with US GDP news largely responsible for last week’s rally in stocks. The market cheered the positive economic data that showed growth in Q4, 2023 amid a cooling in prices as core inflation fell YoY. But JPMorgan analysts say that while they expect a soft landing for 2024, fiscal spending could become a drag.

Apart from the US, also on investor’s watchlist is China. Noelle Achesson, author of the Crypto Is Macro Now newsletter, recently pointed to China’s economic outlook as a “big deal.”

Other than the impact on Bitcoin price last week, the analyst says a boost to investor confidence amid a cut to reserve requirement ratio (RRR) and interest rates on bank loans could aid risk assets markets.

“Any boost to Chinese investor sentiment could help global risk markets… especially if Hong Kong gets spot BTC ETFs within the next few months,” she noted in post on X.

Read more here: Global economic data of the week: Jan 29- Feb 2, 2024.

The geopolitical situation also puts the short term outlook in the spotlight. In a recent interview with Bloomberg TV, economist Mohamed El-Erian, despite the anticipation of a soft landing for the US economy, inflation and geopolitical turmoil could pose a challenge.

His comments came as the Middle East remains a volatile environment, with worsening attacks in the Red Sea and a deadly attack on US troops in Jordan. Oil prices rose on Monday following the missile attack as fears of an escalation increased.

El-Erian said the potential for the situation to impact supply chains and shipping costs are real threats that could hit the markets. He added in a post on X that the US getting pulled into the tragedy in the region could be impactful.

A big week ahead for the global #economy and #markets with
Central bank policy meetings in the #UK and #US where, rather than an immediate rate cut, the focus will be on what is signaled for the next few months;
Lots of data, including US #jobs, China's #PMI, and the…

US stock futures were down early Monday as investors turned their attention to the slew of events and reports out this week. Bitcoin was hovering just above $42k while most altcoins traded just in the red.

Stocks are likely to react to earnings reports from tech giants such as Microsoft, Apple, Meta, Alphabet and Amazon as well as FOMC, geopolitical developments and overall economic outlook.

While most of these could have an impact beyond the next few weeks, it’s likely these macro factors will also affect the crypto market in one way or another.

The post Macro events that will affect crypto prices in February appeared first on Invezz

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