Traders and investors brace for a wild week in crypto starting Monday, with multiple key macroeconomic data in the pipeline capable of affecting their portfolios.
Meanwhile, Bitcoin (BTC) remains above the $100,000 mark. Whether this key level holds as support will depend on how traders navigate the economic data due for release this week.
Donald Trump Inauguration
Monday, January 20, marks the Martin Luther King Jr. holiday in the US. Notwithstanding, it represents an important day for crypto market participants in the country because of Donald Trump’s inauguration. On his first day, Trump committed to signing a flurry of industry-favoring executive orders.
In the run-up to the elections, Trump committed to a much lighter touch from regulators, particularly around cryptocurrencies, the cornerstone of his bid. Therefore, the pro-crypto candidate’s return to the White House has fueled speculation about potential positive regulatory shifts. Against this backdrop, there has been heightened interest in Bitcoin among American investors.
Considering the markets will be closed for the holidays on Monday, the impact of this key development will only hit markets the next day. Nevertheless, some investors continue to exercise caution, bracing for impact in either direction.
“This Trump inauguration is either a huge sell-the-news or that’s a total mid-curve and of course, we are going higher,” one user expressed.
Initial Jobless Claims
Initial jobless claims on Thursday will reveal how many US residents filed for unemployment benefits last week, offering fresh insights into the labor market’s health.
In the previous report, Initial Jobless Claims surpassed consensus and increased to 217,000 for the week ending January 10. This print missed initial estimates and was higher than the previous week’s tally of 203,000.
If the trend of increased jobless claims continues, it will extend the trend of economic hardship and a weakening labor market. This could lead to reduced consumer spending and consumer confidence, which can harm various financial markets, including Bitcoin and cryptocurrency.
When jobless claims increase, it suggests that more people are unemployed or unable to find work. This reduces disposable income and, by extension, investment in assets like Bitcoin.
BOJ Possible Rate Hike
Another major focus this week is the Bank of Japan’s interest rate decision and economic outlook report on January 24. A rate hike could signal a shift in global liquidity dynamics, putting pressure on carry trades.
“If they hike rates (and they might), global markets are going to feel it. Crypto included,” one user on X shared.
A Bloomberg survey of most economists believes that Japan will raise interest rates, which may cause market turmoil. However, this decision hinges on whether there will be any market disruptions following Trump’s inauguration.
In this absence, Japan’s central bank could reiterate its commitment to further rate hikes if the economy maintains its recovery, Reuters reported on Friday, citing sources familiar with the matter.
“Bitcoin could experience a sharp 50% drop starting in 7 days. This aligns perfectly with the potential 1929 flash crash pattern following BoJ’s rate decision on Jan 24,” another user on X quipped.
Another popular user and researcher on X, Cypress Demanincor, shares the sentiment, indicating that the BOJ rate hike could have more bearing on Bitcoin price action than Trump’s inauguration.
“Everyone’s attention is on the Trump Inauguration for the next major market move when in reality the bigger force to consider is the potential BOJ interest rate hike that could take place. If they don’t then we shouldn’t have anything to drastic worry about until March. Still, when managing risk in a portfolio something to be mindful of, and mentally prepared for,” the researcher said.
The general perception is that BOJ’s potential decision to increase interest rates could impact global financial strategies like the yen carry trade. In this strategy, investors borrow in yen at low rates to invest in higher-yielding assets. This could disrupt liquidity and affect risk assets globally, potentially overshadowing the colloquial “Trump rally.”.
Bitcoin has a reputation for being sensitive to global economic shifts. A rate hike by the BoJ could lead to a sell-off of risk assets, including BTC. This is because investors would need to cover positions in the yen carry trade, potentially causing price volatility in the pioneer crypto.
Consumer Sentiment
Further, the US consumer sentiment report on Friday is also critical, providing an aggregate measure of how individuals feel about their finances and the economy as a whole. Positive consumer sentiment can lead to increased confidence in the economy and potentially higher investment in assets like Bitcoin. On the other hand, negative sentiment may result in decreased investor confidence and a shift towards safe-haven assets, which could impact Bitcoin prices.
BeInCrypto data shows that Bitcoin was trading for $102,461 as of this writing, down by 2.15% since the Monday session opened.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
