Several important economic reports, including GDP and unemployment claims data, were released in the United States today. Unemployment claims dropped from 192,000 to 186,000, which was better than predicted but still dampened investor enthusiasm. The crypto market and Bitcoin in particular were hit hard this morning by the NASDAQ mini’s 80-point drop. According to preliminary data, economic growth in the United States slowed to 2.9% in Q4, from 3.2% in Q3. Indicators like the “fear and greed index” can be used to get a sense of how buyers and sellers are feeling in the Bitcoin (and broader crypto) market. The metrics use a numeric scale between zero and one hundred to express this feeling.
Markets with values below 50 indicate nervous investors, while those exceeding 100 indicate greedy stockholders. Even though this threshold appears tidy on paper, in practice, the range of scores somewhere between 46 and 54 is typically associated with a “neutral” attitude. Only when the measure breaks beneath or above this phase field do we see a true breakout toward fear or greed. Additionally, there are two other “unique” emotions: excessive greed and intense fear. The former happens at values more than 75, while the latter occurs at values smaller than 25. Tops and bottoms have typically formed when traders have held these extreme mentalities, hence they are significant.
The most recent data indicated that the US business did better than expected, but it still runs the risk of contracting. The November and December retail sales numbers for the US depicted a bleak picture. After dropping by 1.0% in November, retail sales dropped by 1.1% in December. The data prompted a 1.76-point increase in the NASDAQ Composite Index, with earnings reports from US companies helping to buoy the market. The NASDAQ Index gained ground after Tesla Inc (TSLA) announced its highest quarterly sales ever.
Bitcoin Runs Bullish
In January of 2023, Bitcoin (BTC) prices rose by about 40%. For the first time since March 2023, BTC is in the “Greed” phase of the “Fear and Greed” index. Fear and greed have reached 55, the highest level in roughly 10 months as of press time. December of 2022 saw a “Fear” metric score of only 28. After almost three weeks of gains, Bitcoin’s (BTC) on-chain indicators appear to be stabilizing. Furthermore, prices are hovering above several key technical indicators.
However, it may be premature to announce a full bull market turnaround at this time. And yet, it seems like we might be nearing that point. In addition, as noted by the ubiquitous PlanB, Bitcoin (BTC) has returned to positive realized returns. As a result, it appears that sellers are making money rather than losing money. Realized return refers to the actual increase in value of an asset over a given time frame.
What did 2019 hold for Bitcoin?
The present uptrend in BTC is evocative of the price surge in 2019. The Federal Reserve eased off on monetary policy tightening that year. As a result, the price of bitcoin rose by over 250%. In a similar vein, the Fed is currently reducing its policies as volatility nears the Department’s target of 2%. The preceding period of Fed tightening of the money supply lasted three years, from December 2015 to December 2018. The department pushed the central bank’s benchmark borrowing rate up to 2.25–2.50 percent. At the time of writing, one bitcoin was trading for $22,828.12, a loss of 1.3% from the previous day.
It’s possible that Bitcoin, the first cryptocurrency, is about to experience a new wave of popularity. The market is expecting it to slow the pace of rate hikes to twenty-five basis points in February and March, and then pause its rate-hike cycle, since forward-looking indicators imply a severe drop in inflation and business activity. There’s a chance that this will cause Bitcoin’s price to skyrocket. The Federal Reserve increased its key interest rate from 0% to 4.25% last year.