3 Major Events That Could Affect The Crypto Market This Week

Key Insights

• The crypto market started the week on a volatile note. However, more volatility could be inbound.
• The first of these events is the aftermath of Moody’s decision to downgrade the U.S. credit rating.
• The second is PMI and home sales data, both of which have historically had some strong influence on market sentiment.
• Finally, the scheduled appearances of 14 Federal Reserve officials is expected to spark massive volatility in both crypto and equities within the week.

It doesn’t seem like much, but the crypto market has entered a very important week.

Traders and investors are on the lookout for several major macroeconomic developments in the United States and beyond.

While Bitcoin is currently ranging between $102,000 and $106,000, several upcoming events could either boost or derail its chances of making a new all time high soon.

Here are the major events to be aware of, from credit rating downgrades to economic data releases and Fed commentary.

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Event 1: Moody’s Downgrade and Possible Bearishness For Crypto

On Monday, financial markets began reacting to Moody’s decision to downgrade the U.S. credit rating.

Historically, such downgrades point towards a weakening in the government’s financial standing. Moreso, they tend to motivate investors to start displaying less appetite for risk.

Investors rushing towards safer assets like U.S. Treasury bonds, gold and even the U.S. dollar tends to come at the expense of riskier assets like.

In past market cycles, Bitcoin has shown interesting responses to credit downgrades. While some investors see the cryptocurrency as a hedge against inflation and fiscal instability, others tend to take their money out of speculative markets like crypto when economic uncertainty begins.

The Kobeissi Letter pointed out that there is a possibility of "risk-off" behavior, in which Bitcoin and Ethereum might see temporary downward pressure as investors rebalance their portfolios.

This is already happening because on Monday morning, the S&P 500 opened at 5,300 points.

Interestingly, analysts pointed out a 0.7 correlation between its movement and Bitcoin's price during similar risk-off periods.

Such a decline in the stock market could therefore point towards trouble for crypto, at least in the short term.

2. PMI and Home Sales To Be Released

This week will also bring several important data releases that could influence speculation on the Federal Reserve policy.

As expected, this will be a major driver of how much institutional interest crypto gets.

On Thursday, preliminary readings for May's S&P Global Manufacturing and Services Purchasing Managers’ Index (PMI) are expected.

Historically speaking, PMI data has some strong influence on market sentiment, especially if it shows signs of contraction or unexpected slowdown:

Especially in U.S. industrial output and service sector performance.

In addition, home sales figures will be released, including existing home sales data on Thursday, and new home sales on Friday.

While housing data tends to have a limited effect on crypto prices, it does paint a picture of the U.S. economy as a whole.

Investors use indicators like these gauge whether the Fed might shift its stance on interest rates.

Considering how Fed Chair Jerome Powell has been adamant about keeping interest rates high despite lower inflation data, any sign of economic weakness could restart the discussions around rate cuts.

Lower interest rates would likely benefit the crypto market and encourage investors to take more risk.

3. Federal Reserve Speakers and Monetary Policy Signals

Likely the most influential factor this week will be the scheduled appearances of 14 Federal Reserve officials.

These officials are expected to provide fresh commentary on the direction of monetary policy.

Their speeches can unexpected changes in investor expectations, especially around interest rates and inflation.

According to recent market behavior, the Fed speakers hold a great deal of sway over both equities and crypto.

For instance, on 15 May, the Grayscale Bitcoin Trust (GBTC) saw $63 million in inflows following dovish commentary from a Fed member.

As such, institutional flows are incredibly sensitive to policy signals.

Overall, with U.S. Treasury yields rising again and the Fed resisting pressure to cut rates, the crypto markets is highly responsive to any hints about future monetary moves.

Traders should track these speeches very closely, especially since market volatility often spikes after they happen.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.