US Macro Data Pressures Bitcoin, Market Worries About "Stagflation" Prospects
The US macroeconomic report released on Wednesday put pressure on Bitcoin and the entire cryptocurrency market, with "stagflation-like" data combined with shrinking GDP and weak private sector employment growth, triggering widespread market concerns.
VX: TZ7971
According to the ADP employment report, the US private sector added only 62,000 jobs in April, far below the expected 108,000 and significantly lower than the 147,000 in March.
Meanwhile, US GDP declined by 0.3% in the first quarter, the first negative growth since 2022, with the market previously expecting a 0.2% increase. However, from the Personal Consumption Expenditures (PCE) index perspective, inflation has somewhat slowed down. PCE is a highly watched indicator by the Federal Reserve. Data shows that the year-on-year PCE in March rose by 2.3%, slightly higher than the expected 2.2%; the core PCE excluding food and energy rose by 2.6% year-on-year, in line with economists' estimates but lower than the revised February data (3.0%).
Affected by this news, Bitcoin briefly fell below $94,000, dropping 1% intraday. Mainstream Altcoins such as Ethereum and Solana also declined simultaneously, driving the overall crypto market to retreat nearly 4%. However, the market has partially recovered by the time of writing.
In traditional financial markets, the S&P 500, Nasdaq Composite, Dow Jones Industrial Index, and NYSE Composite Index all closed lower.
May Policy Meeting May Become a Critical Turning Point
The economic signals released on Wednesday were mixed, bringing new uncertainty to the market. The Federal Reserve may be inclined to cut rates to provide financial relief and support.
Federal funds rate futures currently reflect an increasing market expectation of more than four rate cuts this year, as the Federal Reserve tries to find a balance between falling inflation and clear signals of economic slowdown. This delicate policy balance will be the core driver of market trends in the coming weeks.
Rate cuts may benefit Bitcoin and other risk assets. A weaker US dollar, improved liquidity from loose monetary policy, and declining US Treasury yields will collectively create a "more supportive macro environment" for Bitcoin and the crypto market.
If coupled with the unexpected 0.3% GDP contraction and Trump's pressure on the Federal Reserve to adopt a more relaxed policy, the possibility of a dovish turn will be greater. With the easing of tariff risks in some areas and Bitcoin's still thin liquidity, even moderate capital inflows could cause Bitcoin to rise significantly. While the current market has upward potential, it is also extremely sensitive to macro changes.
The US Federal Reserve will hold a meeting on May 6-7 to decide whether to cut rates, maintain current rates, or raise rates.
Recently, nearly $3 billion of large-scale funds have flowed in, and futures open interest has also increased simultaneously. Interestingly, the funding rate remains at a low level.
This shows that the current new capital inflow mainly comes from real long-term holding demand, which is more bullish compared to the ETF buying driven by arbitrage funds at the beginning of the year.
Despite a series of negative news recently, including tariff negotiation uncertainty, MicroStrategy (MSTR)'s weakened BTC purchasing power, and escalating India-Pakistan conflict, BTC price remains stable at the high level of $95,000. This indicates that the market's structural transformation remains solid, and pullbacks become buying opportunities.
