The US Commerce Department’s recent shows that economic growth and GDP have slowed even as Bitcoin struggles to regain $30,000.
The price of Bitcoin (BTC) has remained relatively stagnant for about a week as the US gross domestic product (GDP) is slowing. Currently trading at $28,870 according to CoinMarketCap data, BTC has been unable to hit $30,000, last seen briefly on the 19th of April, and not seen in the first quarter of the year. This trend follows the GDP’s slowing in the same period.
An economic downturn characterized the year’s first quarter as several factors affecting growth. The US economy consistently struggled with increases in the interest rate, along with inflation. According to a Commerce Department report referenced by CNBC, the US GDP rose at an annualized rate of 1.1 in the first quarter. This figure is even worse than the 2% expected by economists the Dow Jones had surveyed. In comparison, the GDP for Q4 rose 2.6%, with the full-year 2022 GDP pulling a 2.1% rise. GDP is a metric used to measure the production of goods and services in a specified period.
The Commerce Department report also included figures on expenditure. The personal consumption expenditures price index beat the 3.7% estimate, reaching 4.2%. Consumer spending climbed 3.7%, with exports rising by 4.8%. However, gross private domestic investment crashed by 12.5%.
Speaking on the situation, LPL Financial’s chief economist, Jeffrey Roach, implied the possibility of a pivotal moment in the economy. Roach suggested that consumers may not be satisfied about the near future and may be slowly suspending consumption and spending. According to Roach:
“The US economy is likely at an inflection point as consumer spending has softened in recent months. The backward nature of the GDP report is possibly misleading for markets as we know consumers were still spending in January but since March, have pulled back as consumers are getting more pessimistic about the future.”
Bitcoin, US GDP, and the 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 in comparison with other major fiat currencies. Currently, this negative correlation has strengthened.
According to data from charting and market platform TradingView, the DXY and Bitcoin’s 90-day coefficient has hit -0.70, not seen in two months. This figure was -0.11 about four weeks ago. Except in specific scenarios, the native correlation has withstood for more than three years. The recent strengthening suggests a possible rise in the price of Bitcoin as the US GDP, along with other figures from the Commerce Department, shows disappointing numbers.
Nevertheless, some analysts are still considerably optimistic. Although consumer spending may be waning, the strong job market is still resilient enough to keep general economic activity optimum. However, most other analysts believe the US economy might see a recession later this year. The Federal Reserve has spiked interest rates by over 4.75% in a year. Although inflation fell to 5% last month, it is still much higher than the Fed’s 2% destination.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.