Crypto Volatility Incoming: Breaking Down This Week’s Major Macro Events
This week in the crypto market is shaping up to be one of the most significant in terms of macroeconomic events. These unfolding developments will not only have a ripple effect on cryptocurrencies, but also on stocks, the dollar, and every other asset class. Let’s break down these crucial events and why they matter to crypto enthusiasts and investors.
The Macro Economic Calendar And Its Impact On Crypto
All week long, the crypto market will be exposed to the impact of a series of macro events, ranging from inflation metrics to a Fed rate decision, to the unsealing of the “Hinman documents” which have the potential to change the outcome of the Ripple v. SEC case.
The rollercoaster week ahead on the regulatory front kicks off with the release of the Hinman documents, which could potentially influence not just the outcome of the Ripple court case, but the status of cryptocurrencies as securities broadly. The SEC is also expected to respond to Coinbase’s request for clearer regulatory rules.
The macro portion of the eventful week begins with CPI numbers for May. The CPI is a critical indicator of inflation, measuring the average change in prices for a basket of consumer goods and services. If the CPI is higher than expected, it suggests inflation is rising, which can lead to increased speculation about interest rate hikes. These potential hikes can strengthen the dollar, which usually causes Bitcoin and other cryptocurrencies to decline as investors seek safety in the dollar.
The following day will see the release of May PPI numbers. PPI measures the average change in selling prices received by domestic producers for their output. A higher than expected PPI signals increased inflation at the production level, which can lead to a rise in consumer prices down the line. This can impact cryptocurrencies similarly to the CPI, as a stronger dollar may lead to a decrease in cryptocurrency values.
The crypto market is signaling explosive volatility ahead | TOTAL at TradingView.com
If that wasn’t enough, Wednesday brings the Federal Reserve interest rate decision. Interest rate decisions are always closely watched by financial markets. If the Federal Reserve raises rates to combat inflation, the cost of borrowing increases, and businesses are less likely to take on debt. This could lead to a decline in the stock market, which often spills over into the crypto market as investors seek to reduce overall risk. However, experts are expecting a potential pause in rate hikes, which could boost crypto prices in tandem with stocks. But only if inflation figures cooperate.
On Thursday, additional macro reports will be released on Initial Jobless Claims, Retail Sales, Industrial Production, Business Inventories, and more. These data points give us a snapshot of the current economic health. High jobless claims can indicate economic weakness, which might lead to a flight to the safety of the dollar and a sell-off in riskier assets like crypto. Conversely, strong retail sales and industrial production could indicate economic strength and increase risk appetite, potentially bolstering crypto prices.
Finally, on Friday, Fed Governor Waller will give an early morning speech. The speech could give insights into the Fed’s thinking and future monetary policy. Depending on the tone and content of Waller’s remarks, crypto markets could experience significant volatility.
The culmination of these events leads into a holiday weekend for US legacy markets, observing Juneteenth. Historically, reduced trading during holiday periods can lead to higher volatility due to lower liquidity.
