This is an important week, in fact these next few days we have several events to take into account from a macroeconomic point of view, which affects the performance of cryptocurrencies in the market, perhaps the crypto market is stationary waiting for precisely this important news about the US economy.
As we all know, the US economy has correlation with the movement in the price of many assets globally, even influencing the crypto market due to the liquidity that can provide this economy that increasingly sees cryptocurrencies with better eyes, starting with Bitcoin.
US inflation data can have an effect on the crypto market, as investors can intuit through this data, the interest rate measures that will be released to the world on March 20. Normally, markets react before the Fed chairman's statements; however, there is always the high possibility of seeing volatility at the time of these statements.
Economic policies in the US are focused on inflation, however, this policy must be tightened in such a way as to avoid a recession and a possible banking crisis that looks increasingly possible as interest rates remain unchanged.
According to data, the cumulative annual inflation, which is at 3.1% may remain at the same number, this is an important data for interest rate decision making, which could be an aspect to take into account in the development of the price of cryptocurrencies.
With inflation holding up, interest rates are likely to maintain their number, perhaps raising them may amplify risk in the banking sector, so they may keep rates at the same levels, although this may all change at a moment's notice depending on the Fed's economic policies.
After the US inflation data is released, traditional markets and risk markets (in which cryptocurrencies are found) will react to prepare for the interest rate speech, that is the time when markets start to react and not at the time of the speech.
It is always good to keep in mind that risk markets are the ones with the highest volatility to this kind of announcements, so it is a week to be very attentive to the development of the BTC price, which is the main reference in the crypto ecosystem.
If inflation is lower, it amplifies the chances of an interest rate cut, which would free up more liquidity for BTC due to the asset being in the global spotlight thanks to the ETFs approved in January. Otherwise, higher inflation may cause investors to cut positions where risk markets are the most vulnerable, but where does that money go?
While these types of moves in higher interest rates will cause investors to seek refuge in other assets, while we know the capabilities of BTC to be a decentralised haven of value, many large investors do not fully see it that way (at least for now), so a rise in interest rates may cause investors to take positions in gold and treasuries on a larger scale than BTC, so rising interest rates is not good news for Bitcoin.
As for the crypto market, institutional investors have been added via ETFs, however, it should be noted that these types of investors are largely from the US, so they may be looking at the inflation and later interest rate data to make decisions on their Bitcoin positions, or open new positions depending on the data, this would imply a sideways range movement for the Bitcoin price with a ceiling that may rise just over 70k while waiting for decisions, although the market may be reactive on Tuesday itself after the inflation announcement.
A favourable inflation announcement in a way that triggers an interest rate cut will undoubtedly affect ETF volume in favour of the price, however, it is a less likely possibility due to hawkish speeches from the FED.
Next week we will look at the US inflation data and how it affected the price of cryptocurrencies in preparatio
