The market seems to be adapting to the relentless onslaught of negative news. Last week, the price of Bitcoin continued to decline, but the decline was not too severe at around 2.98% for the week. This was because the consumer and producer price indices (CPI, PPI), which were a source of concern, came in below market expectations.
At the beginning of the week, Bitcoin started at around $70,000. The mood was not very good. After former U.S. President Donald Trump hinted at a recession in an interview, prices of risky assets fell across the board. As Bitcoin and Ethereum prices plummeted, around $1 billion in derivatives positions were liquidated.
On the on-chain data front, the movement of miners was noteworthy. As the Bitcoin price briefly fell to around $77,000, miners started selling their holdings. Typically, miner sales start when a downward price trend becomes clear.
The rebound began from the 12th, when the CPI data was due to be released. The U.S. February CPI came in at 2.8% on a headline basis, 0.2%p lower than the previous month and 0.1%p below Wall Street expectations.
Notably, the core CPI, which had risen 0.76% in January, rose only 0.22% in February, as airfares fell by around 4%. The rest of the items, both services and goods, showed relatively solid performance.
The PPI data released on the 13th also came in 0.1%p below Wall Street expectations, driving the Bitcoin rebound. PPI was 3.2%, 0.5%p lower than in January, with the services component declining but the goods component remaining solid.
The two main concerns currently dominating the market are a potential U.S. recession and rising inflation due to the U.S. trade war. The decline in service-related PPI reflects weakening consumption and a potential recession, while the solid goods-related producer prices can be interpreted as the negative impact of the trade war.
Michigan 1-year Inflation Expectation at 4.9%... Prices Rebound
The turning point for prices was the Michigan inflation expectation data released on the 15th. Last month, the 1-year inflation expectation was 4.3%, which was an unexpected negative factor for the market. This month, it worsened to 4.9%.
This shows that the market is nervously watching the economic policies of the Trump administration. The consumer sentiment index released at the same time hit its lowest level since November 2022.
However, it is encouraging that the market did not see a significant decline despite the deterioration of these indicators. This can be interpreted as a signal that the market is adapting to the uncertainty caused by the Trump administration's tariff policies. On the day, prices of Bitcoin and Nasdaq stocks briefly fell with the release of the indicators, but then rebounded strongly.
In contrast to the anxious investors, there was no shortage of positive news across the industry this week. In particular, there were many investment news related to Binance. The Abu Dhabi sovereign wealth fund MGX invested $2 billion in the Binance exchange using stablecoins.
According to the Wall Street Journal, the Trump family is reportedly eyeing the acquisition of Binance US, the current U.S. trading platform of Binance. The Trump family recently almost 'sold out' the token sale of their DeFi coin World Liberty Financial (WLFI), and if they use the funds to acquire the Binance exchange, it could be seen as the Trump family strongly intervening in the cryptocurrency industry. Of course, Binance's former CEO Changpeng Zhao (CZ) strongly denied the Wall Street Journal's report.
Watch for GDPnow Revision on the 19th and the FOMC Meeting on the 20th
This week also has a series of major macroeconomic issues. On the 19th (Wed) at noon, the Bank of Japan, and on the 20th (Thu) early morning, the U.S. Federal Reserve's Federal Open Market Committee (FOMC) will hold a meeting and decide on the benchmark interest rate. If Japanese interest rates rise and U.S. interest rates fall, an unwinding of the yen carry trade could occur.
At 9:30 pm on the 17th (Mon), U.S. retail sales data, which can gauge the possibility of a U.S. recession, will be released. Additionally, the GDPnow data from the Atlanta Fed, to be released in the early morning of the 19th (Wed), also needs to be closely watched.
The Atlanta Fed's GDPnow recently recorded a somewhat shocking figure of -2.4%, but subsequent data is expected to show that this was due to a sudden surge in U.S. gold imports in January, and after adjustments, the figure could improve to around 0.4%. I wish all readers successful investments this week.
