It’s time again for the daily macro update with the key economic developments that influence the Bitcoin price. Starting with the Chinese economy, which is under severe pressure but bounced back with unexpectedly strong data last night. Furthermore, the European Central Bank (ECB) appears to have completed its rate hike and the US economy remains solid.
What do all of these developments mean for the Bitcoin price? Today we are taking a proverbial tour through the (economic fields).
Strong economic data from China
It probably hasn’t escaped your notice that China’s real estate sector is under severe pressure and China’s central bank has been trying to stimulate the economy for some time. While the rest of the world is battling inflation, the opposite appears to be the case in China.
Yesterday evening there was finally some positive news for the Chinese as industrial production rose 4.5 percent compared to expectations for a rise of 3.9 percent. Additionally, retail sales rose 4.6 percent versus the expected 3 percent.
This unexpected rightward turn by China sent the Chinese yuan soaring against the US dollar. Although the US dollar has now (somewhat) recovered from this blow.
The big question is whether the Chinese central bank’s initiatives are enough to help the economy recover. One swallow doesn’t make a summer, but the first positive data are available.
The recent interest rate hike
Then let’s jump to the Eurozone, because yesterday the ECB raised interest rates for (probably) the last time and they hope to reduce inflation to 2.0 percent with current interest rates. Inflation is still above 5 percent in the Eurozone, so it may take a long time for interest rates to fall again.
While inflation continues to be a problem for the Eurozone, the economy is also starting to weaken. Consumption is declining, companies are having an increasingly difficult time and growth forecasts are also declining; which is particularly good for the US dollar.
The chart above shows that the Euro is in a significant downtrend against the US Dollar.
There currently appears to be no sign of a trend reversal. The US economy remains solid, meaning the US Federal Reserve will likely be able to continue the fight against inflation longer than the ECB.
What does this mean for the Bitcoin price?
Bitcoin price has shown some positive momentum in the last few days. Although fundamentally little has changed. All in all, the macroeconomic environment is not yet an incentive for Bitcoin.
We are primarily looking at the United States.
As long as the American economy continues to develop robustly, interest rates will not fall and the pressure on the Bitcoin price will be relatively high.
One reason why high interest rates are putting pressure on the Bitcoin price is that you can now achieve returns of >5 percent on US government bonds.
This means you can earn a fairly risk-free return of +/- 5 percent on the US dollar, and many investors prefer this to the riskier Bitcoin; especially in this macroeconomic landscape.