The Bitcoin price is facing the most important week of the year so far. While BTC managed a slight rally of around 3% over the weekend, this week will have to show whether the rise of the last few weeks was sustainable or whether the Fed will bring out its hammer and make the entire financial market feel its resentment about the premature spike.
However, it is not just the FOMC meeting of the U.S. Federal Reserve that is coming up this week, but other important macroeconomic events as well. Given the close correlation of Bitcoin and the broader crypto market with the S&P 500 and the US Dollar Index, it is very likely to be a very volatile week.
This week, some of the largest U.S. tech companies will present their latest corporate figures for the past Christmas quarter. In addition to Meta, the results and outlook of Apple, Amazon, as well as Google’s corporate parent Alphabet, will be of key importance.
Whether these four tech giants will be able to achieve their revenue and profit expectations is difficult to gauge. However, the corporate numbers could have a big impact on the entire S&P 500. In addition, dozens of other renowned companies will be reporting their figures for the past quarter.
Before the U.S. central bank publishes its interest rate decision on Wednesday, the latest U.S. consumer confidence figures will become important. On Tuesday, the Conference Board (CB) will publish new figures on U.S. consumer confidence for December.
In the last release, optimism about the economic development in the U.S. had risen significantly to 108.3, contrary to forecasts. A value of 109.0 is forecasted for December.
If the figure turns out to be considerably better than forecast once again, the US Dollar Index (DXY) could see an uptick in the short term, which would have a negative impact on the price performance in the crypto and Bitcoin markets due to the inverse correlation. If the forecast is missed, this could in turn have a positive impact on the BTC price.
In general, investors should again keep an eye on the DXY this week. At press time, it was at 101.94 and thus just above the extremely important support at 101.
Interest Rate Decision by the U.S. Federal Reserve
On Wednesday, February 1, 2023, at 2 pm EST, all eyes will be on the Fed’s rate decision when the U.S. monetary watchdog announces its latest interest rate adjustment. According to the CME FedWatch Tool, a whopping 98.9% of analysts expect a hike of just 25 basis points.
Half an hour later, Fed Chairman Powell will again go on camera to explain the decision. Powell’s words are likely to have at least as much value as the rate decision itself. Even though Powell will avoid the word ‘pivot’ like the devil avoids holy water, investors will probably hope for optimism in light of the recent positive data.
On the other hand, any deviation from what is considered a “certain” rate adjustment by 0.25 bps to 4.75 bps could cause a sharp pullback in the S&P 500 and the Bitcoin market.
On Thursday, February 2 at 8:15 am EST, the European Central Bank’s interest rate decision is also due. With inflation still very high at 9.1% in the Eurozone, the market is expecting a 0.5 bps rate hike to 2.5 bps.
If the ECB surprises with a 75 bps hike, the euro-dollar exchange rate could gain strength in an initial reaction, which in turn could put pressure on the DXY, ultimately benefiting Bitcoin and crypto.
Closing out the week, on Friday, there are the non-farm employment figures in the U.S. for the month of January. The figures are likely to be particularly important in assessing the likelihood of a recession in the U.S. In addition, it is well-known that the Fed is keeping a close eye on the labor market.
At press time, Bitcoin traded at $23,339, after being rejected at the $24,000 mark yesterday.
Featured image from Kanchanara | Unsplash, Chart from TradingView.com