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Traders are preparing for a significant week of macroeconomic events, including the release of Fed minutes and the core PCE inflation report.
The cryptocurrency market is predominantly in decline. (Behnam Norouzi/Unsplash/Modified by CoinDesk)
Key points to consider:
- Bitcoin experiences a downturn, dragging the wider market into negative territory.
- Eighty-five of the top 100 cryptocurrencies are facing losses.
- This sell-off occurs despite lower U.S. inflation figures, which have bolstered expectations for at least two rate cuts by the Federal Reserve.
- Traders are preparing for a significant week of macroeconomic announcements, including Fed minutes and the core PCE inflation report.
On Monday, the cryptocurrency markets are deeply in the red, with market leader bitcoin continuing to decline ahead of a week filled with economic data.
At the time of reporting, bitcoin was trading around $68,200, reflecting a nearly 3% decrease over the last 24 hours, while XRP , ether , and are showing even larger losses. A decline has impacted 85 of the top 100 cryptocurrencies by market capitalization, with privacy coins such as monero and zcash experiencing declines of 10% and 8%, respectively.
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Smart contract tokens also faced declines, with the CoinDesk Smart Contract Platform Select Capped Index dropping nearly 6%, bringing its year-to-date decline to 28%.
The current market weakness is particularly disappointing in light of the recent weak U.S. consumer price index data that had kept the possibility of Fed rate cuts alive.
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The CPI growth slowed to 2.4% year-on-year in January, compared to 2.7% in December, according to official data, which bolstered expectations for at least two 25 basis point cuts by the Fed this year. Consequently, the 10-year U.S. Treasury yield fell to 4.05%, marking the lowest level since early December. Bitcoin had rallied, increasing from nearly $66,800 on Friday to over $70,000 over the weekend, but was unable to maintain that level.
Vikram Subburaj, CEO of the regulated Giottus exchange in India, stated that selective demand is the reason for the difficulty in sustaining rallies.
"Risk appetite has remained selective, and macro cross-currents have kept traders cautious. In the derivatives market, behavior suggests a ‘de-leveraging first, asking questions later’ mentality. Rallies have struggled to maintain momentum, and dips are being purchased only selectively at clear levels," he remarked in an email to CoinDesk.
Macro-heavy week ahead
A week filled with macroeconomic data is on the horizon, as traders await the minutes from the January Fed meeting and the core personal consumption expenditures price index (PCE), which is the Fed’s favored inflation metric, for new positioning signals.
"PCE inflation, the Fed’s preferred indicator, will be closely scrutinized for confirmation that price pressures are easing, especially after the CPI indicated only gradual disinflation while inflation remains above the 2% target," stated Dessislava Laneva, a Nexo dispatch analyst, in an email.
"Markets will evaluate both the monthly momentum and the year-on-year trend for implications regarding the policy direction," Laneva added.
In traditional markets, Mark Nash from Jupiter Asset Management, who has previously been bearish on the yen, has changed his stance to a bullish outlook, predicting an 8–9% appreciation of the yen, particularly against the Swiss franc.
Recent months have seen a significant positive correlation between the yen and bitcoin, making any strength in the yen a crucial factor for bitcoin supporters.
