Recent data from the US Department of Commerce show that economic growth and GDP are slowing, even as bitcoin struggles to get back to $30,000.
value of Bitcoin (BTC) has been relatively stable for almost a week as the US gross domestic product (GDP) is slowing down. Currently trading at $28,870 according to Coinmarketcap data, BTC has been unable to reach $30,000, last seen on April 19, and hasn’t been seen in the first quarter of the year. This trend follows a slowing of GDP over the same period.
An economic slowdown characterized the first quarter of the year as one of several factors affecting growth. The US economy struggled with persistent inflation as well as rising interest rates. according to the Department of Commerce reports As referenced by CNBC, US GDP grew at an annual rate of 1.1 in the first quarter. The figure is worse than the 2% expected by economists polled by Dow Jones. In comparison, GDP for Q4 grew by 2.6%, with full-year 2022 GDP rising by 2.1%. GDP is a metric used to measure the production of goods and services over a specific period of time.
The Commerce Department report also includes spending figures. The personal consumption expenditure price index rose to 4.2%, beating the estimate of 3.7%. Consumer spending climbed 3.7%, with a 4.8% increase in exports. However, gross private domestic investment fell 12.5%.
Speaking on the situation, Jeffrey Roach, chief economist at LPL Financial, forecast the possibility of a critical moment in the economy. Roach suggested that consumers may not be complacent about the near future and may gradually suspend consumption and spending. According to Roach:
“The US economy is likely at an inflection point due to the softening of consumer spending in recent months. The lagging nature of the GDP report is potentially misleading to markets as we know that consumers were still spending in January but have been spending since March.” has since pulled back as consumers are becoming more pessimistic about the future.
Bitcoin, US GDP and Dollar Index
Historically, the correlation between Bitcoin and the Dollar Index (DXY) has been negative. The DXY is an index that evaluates the dollar’s exchange rate against other major fiat currencies. Currently, this negative correlation has strengthened.
According to data from charting and market platform TradingView, the 90-day coefficient for the DXY and bitcoin has reached -0.70, a level not seen in two months. About four weeks ago this figure was -0.11. Except in specific scenarios, the original correlation has held for more than three years. The recent strength indicates a possible rise in bitcoin price as US GDP, as well as other figures from the Commerce Department, show dismal numbers.
Nevertheless, some analysts are still quite optimistic. Although consumer spending may be down, the strong job market is still resilient enough to keep general economic activity optimal. However, most other analysts believe the US economy could enter a recession later this year. The Federal Reserve has raised interest rates by more than 4.75% in one year. Although inflation fell to 5% last month, it is still well above the Fed’s 2% target.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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