It’s now June, and the calendar is almost at the half-year mark. Key macroeconomic events may soon provide the catalyst Bitcoin (BTC) needs to finally come off the low end of its trading range. This is long-awaited, as investors in the cryptocurrency would like to see it surpass its all-time high of $73,000 set in March. Bitcoin has been lingering at the lower end of its trading range, hovering around $68,000 after a strong May that saw an 11% increase.
Bitcoin vs. Traditional Assets
This recent lull in Bitcoin’s price coincides with a period of struggle for other risk assets, particularly U.S. stocks. The Nasdaq and S&P 500 dropped roughly 2% and 1.5% during the last week in May. This suggests a broader market sentiment that could be influencing Bitcoin’s behavior.
Economic Data Could Be Spark
One culprit behind the market’s sluggishness might be the thought of stagflation. Recent U.S. economic data has been mixed, with inflation remaining stubbornly high (April’s Core PCE Price Index was 2.8% year-over-year) and economic growth potentially slowing down (May’s Chicago PMI plunged to a dismal 35.4).
The bond market seems to be interpreting this data as a sign of softening economic conditions. The 10-year U.S. Treasury yield dropped after the PMI news, potentially signaling anticipation of lower interest rates in the future.
The Week Ahead Could be Key
This week may provide the key to what Bitcoin needs to stop going sideways and start to take a direction. This includes Monday’s National PMI Report, which will offer a broader picture of U.S. manufacturing activity. A confirmation of slowing economic growth could bolster the case for lower interest rates.
On Friday, the National Employment Report is released. This highly anticipated report will shed light on the health of the U.S. labor market. A weaker jobs report could further strengthen the argument for a dovish Federal Reserve policy.
If June’s economic data confirms a slowdown, it could prompt the Federal Reserve to reconsider its stance on interest rate hikes. Lower interest rates are generally seen as positive for Bitcoin, as they make it a more attractive alternative to traditional fixed-income investments. This, in turn, could trigger a surge in Bitcoin’s price, potentially leading to a breach of its all-time high.
While a dovish Fed scenario appears bullish for Bitcoin, strong economic data in June could paint a different picture. A robust economic recovery might lead the Fed to maintain its hawkish stance on interest rates, potentially causing Bitcoin to retest its May lows.
Key Takeaway
The coming weeks in June will provide ample opportunities for Bitcoin’s price to do more than flatline toward the bottom of its range. If it breaks below its range, June could be a disappointing month. However, Bitcoin now reacts more than ever to economic numbers, and the coming weeks will be packed full of data and reasons for Bitcoin to take a direction and run with it for a while. If it breaks through its March high, it may be the start of a new long-term rally.
