The price of Bitcoin is facing its most important week of the year so far. While BTC managed a slight gain of around 3% over the weekend, this week will have to show whether the gains of the past few weeks have been sustainable or if the Fed will bring out its hammer and make the entire financial market feel its resentment for the premature spike.
But this week is not only the FOMC meeting of the US central bank, but also other important macroeconomic events. Given the close correlation of Bitcoin and the broader crypto market with the S&P 500 and the US Dollar Index, this is likely to be a very volatile week.
What to watch this week in Bitcoin and crypto
This week, some of America’s largest technology companies will present their latest corporate data for the past Christmas quarter. Apart from Meta, the results and prospects of Apple, Amazon, as well as Google’s corporate parent Alphabet will be key.
It is difficult to assess whether these four tech giants will be able to achieve the expected revenues and profits. However, corporate numbers could have a big impact on the entire S&P 500. In addition, dozens of other reputable companies will release their numbers for the previous quarter.
Before the US central bank announces its interest rate decision on Wednesday, the latest data on US consumer confidence will be important. On Tuesday, the Conference Board (CB) will release new data on US consumer confidence for December.
In the latest edition, optimism about economic development in the US rose significantly to 108.3, contrary to forecasts. A value of 109.0 is predicted for December.
If the figure turns out to be significantly better than forecast once again, the US Dollar Index (DXY) could rise in the short term, which would have a negative effect on the price performance of the crypto and Bitcoin markets due to the inverse correlation. If the forecast is missed, it could have a positive impact on the price of BTC.
Overall, investors should keep an eye on the DXY again this week. At press time it was at 101.94 and thus just above the all-important support at 101.
Interest rate decision by the US Federal Reserve
On Wednesday, February 1, 2023, at 2:00 PM EST, all eyes will be on the Fed’s interest rate decision when the US monetary watchdog announces its latest interest rate adjustment. According to the CME FedWatch Tool, a whopping 98.9% of analysts expect an increase of just 25 basis points.
Half an hour later, Fed Chairman Powell will appear on camera again to explain the decision. Powell’s words are likely to carry at least as much weight as the rate decision itself. Although Powell will avoid the word ‘pivot’ like the devil avoids holy water, investors will likely hope for optimism in light of recent positive data.
On the other hand, any deviation from what is considered a “certain” exchange rate adjustment of 0.25 bps to 4.75 bps could cause the S&P 500 and the Bitcoin market to pull back sharply.
On Thursday, February 2 at 8:15 am EST, the European Central Bank is also due to make a decision on interest rates. With inflation still very high at 9.1% in the Eurozone, the market expects a rate hike of 0.5 bps to 2.5 bps.
If the ECB surprises with a 75 bps hike, the EUR/USD could strengthen in an initial reaction, which in turn could put pressure on the DXY, ultimately favoring Bitcoin and crypto.
At the end of the week, on Friday, data on non-agricultural employment in the US for the month of January was published. The numbers are likely to be particularly important in assessing the likelihood of a US recession. In addition, the Fed is known to closely monitor the labor market.
At press time, Bitcoin was trading at $23,339, after rejecting the $24,000 mark yesterday.
Featured Image from Kanchanar | Unsplash, chart from TradingView.com