By Michael Scott
The global crypto market dipped as the expansion of US factory activity propelled the dollar index to $105.00 in mid-November last year.
The data released on Monday, April 1, shows that the US factory data unexpectedly increased in March, sending the dollar index higher. The rise imposed selling pressure on Bitcoin, leaving the lead crypto exchange to exchange below $66,500.
Bitcoin Plunge in Asian Hours
Bitcoin dipped by 5% during the Asian hours, and the dollar index rallied above 105.00. The manufacturing data garnered pace in March in line with the Fed announcing a potential rate cut.
Bitcoin lost its resilience as it faced intense pressure during the Asian trading hours on Tuesday, April 2. The dip arose from the improved US factory data that catapulted the dollar index (DXY) to its highest since mid-November.
The leading crypto by market value dipped by 45 to exchange hands at $66,242. The dip crowned the bearish outcome following a week-long consolidation in the $68,000 – $72,000 range.
Bitcoin’s decline underpinned the losses nursed by the entire crypto market. Solana, Dogecoin and Ether suffered the most significant casualty. With the crypto industry witnessing a widespread bloodbath, the CoinDesk 20 Index declined by 8%.
The dollar index helped track the value of the greenback against other leading fiat currencies, which regained the 105 mark in November last year. The increment took the four-week gain to 2.58%.
The stronger dollar makes dollar-denominated assets such as gold and bitcoin appear expensive, resulting in lower demand.
A stronger dollar triggers financial tightening globally, which dents investors’ willingness to assume risks. Such became inevitable as the factory activity data released Monday by the Institute for Supply Management (ISM) revealed expansion in March to mark the initial growth since September 2022.
The PMI increased by 2.50 points from 47.8 in February to 50.3 in March. The figure surpassed the 50 level to end the 16 consecutive months of contraction.
The weakening dollar made the likelihood of the Fed announcing cut rates unlikely. Besides, the new orders index regained expansion territory as the prices index rose to 55.8% to mark a 3.3 percentage points gain from a 52.5% reading in February reading.
Swap Contracts Indicative of Fed Rate Cuts
Bloomberg publication noted that the Fed rate cuts factored into the swap contracts have dipped to below 65 basis points since the manufacturing report. The market anticipates the Fed will retrace to the 25 basis point cuts this year. The likelihood of the Fed delivering the initial rate cut in mid-2024 declined below 50%.
The markets are reacting to the ISM report, manifesting in ten-year yields up by 10 basis point manufacturing growth and high inflation readings. The market is keen on the tens of speeches and likely updates from the Federal Reserve.
The market considers that the expansion witnessed in March could prompt the officials to devote themselves to significant policy easing.
ING expressed optimism in its note conveyed to clients following Monday’s release by ISM. Nonetheless, officials may become reluctant to commit to policy easing with the increase in inflation rates in the sector.