Macroeconomic factors dominate the narrative as economic turmoil hits Bitcoin hard

The crypto asset market is becoming volatile, with macro factors once again dominating the market narrative. Has Bitcoin confirmed it has bottomed, or has the downward trend just begun?

Early this morning, Bitcoin fell below the key $60,000 support level that has supported its price for the past two months, falling all the way to $56,600 ahead of the Federal Open Market Committee (FOMC) interest rate decision.

While some traders acknowledge that Bitcoin could fall further in the near term, they are also optimistic about the possibility that the sell-off may be largely over. They believe that altcoins have led the decline and that their relative strength today will mark a bottom relative to Bitcoin.

Short-term price predictions are always murky, but crypto bulls remain confident about the future trajectory of asset valuations. Ark Invest CEO Cathie Wood raised her Bitcoin price target to $2.3 million, noting that Bitcoin could go as high as $3.8 million if institutional investor interest increases.

Bitcoin has been one of the best performing assets of the past decade; however, it has never experienced a true recession. As the global economy shows signs of recession, the crypto industry may be about to face its toughest test yet...

Hiring and resignations both plummeted, the job market is gradually freezing, and salary cuts may be imminent

Private sector employment data released last week showed that the U.S. economy shed 192,000 jobs in the third quarter of 2023. This figure was 686,000 higher than the monthly data on U.S. nonfarm payrolls, raising concerns among market participants about the reliability of the data used to reinforce their confidence in a strong labor market.

The "Job Openings and Labor Turnover Survey (JOLTS)" showed that job vacancies in March fell to the lowest level since February 2021, with the decline in job vacancies in the construction industry hitting a record high!

Meanwhile, as hiring fell to the lowest level since January 2018, the ratio of job openings per unemployed person and the quit rate have fallen to near pre-pandemic levels, suggesting that while there is demand to find and keep jobs, employer demand for labor is low. Similar data patterns have previously foreshadowed a decline in employment.

In commodity markets, oil prices plunged nearly 3% this morning as inventory levels exceeded analysts' expectations, suggesting that there may be uncertainty about future economic growth and the corresponding demand for this key commodity input.

Adding to economic concerns were troubling U.S. manufacturing data that showed rising input costs while new orders fell. The combination of data points to stagflation and complicates the business outlook for producers.

While the Fed decided to keep the target rate at 5.5%, the committee delivered a positive surprise to the market, allowing risk assets to rebound from the initial announcement. The Fed announced that it would reduce the size of its balance sheet from $60 billion to $25 billion per month starting in June, a move that will support yields given the increased need to repurchase maturing securities.

The Fed has insisted on keeping interest rates high until there are clear signs of progress toward its longer-term 2% inflation goal. However, the economy is beginning to show signs of weakness.

If deteriorating demand continues to weigh on prices, it is unclear whether the Fed will be able to stimulate the economy out of recession once rate cuts begin, as historically rate cuts have often been accompanied by worsening economic conditions.