By George Ward
According to an analysis from 10x Research, the United States’ economic trajectory is taking a gloomy turn, with a significant impact expected for the crypto market. Per the report, the Bitcoin price would drop below the psychological threshold of $50,000.
Economic Indicators and Market Concerns
The ISM Manufacturing Index, a reliable indicator of economic health, has been declining recently. Concerns among investors and market analysts have increased as a result of this decline, suggesting possible instability in the overall economy.
The founder of 10x Research, Markus Thielen, stated that it might be too soon for cryptocurrency traders to think of initiating leveraged long bets. For several months, there has been a persistent weakness in the market structure, specifically in the fiat-to-crypto on-ramps.
Thus, major industry players have been reluctant to make investments as the extreme volatility and erratic price swings continue. Many are still in the process of deleveraging their portfolios and selling investments.
Correlation between ISM Index and Bitcoin
The 10x Research report also suggested that the historical relationship between the ISM Index and Bitcoin points to a potentially dire future for the cryptocurrency sector. In the past, when the ISM Index reached its heights, Bitcoin noted severe declines.
The ISM Index’s current state points to a sluggish economy and indicates that the stock market might be overpriced. According to the Research, changes will likely happen soon, and the S&P 500 may need to catch up with the ‘real’ economy. Therefore, stock prices could drop significantly by as much as 20%.
US Federal Reserve’s Shifting Position
The Research also emphasized the instability of the US economy, especially in light of the Federal Reserve’s fluctuating policies. Recent data shows that the US economy is weaker than the Federal Reserve had previously predicted.
This stance has been shared by Federal Reserve Chair Jerome Powell, who has hinted at a possible dovish policy move if inflation trends as expected. The possible dovish policy is to protect the economy from future downturns.
Following the drops in the cryptocurrency and stock markets, BTC dominance—a measure of Bitcoin’s market capitalization in relation to the rest of the cryptocurrency industry—reached a new yearly high of 58%.
Ongoing Crypto Market Volatility
Meanwhile, there was a substantial sell-off of Ethereum (ETH), with the price decreasing by 18% in two hours, corresponding with the rise in BTC supremacy. According to IG Markets analyst Tony Sycamore, this trend is a reminder of crypto’s place at the “pointy end” of the risk asset spectrum.
In addition, the wider impact was seen in the stocks of cryptocurrency-related companies, which declined in tandem with growing concerns about the state of the world economies.
Implications on the Bitcoin, Crypto, and Equities Markets
In US pre-market trading, Coinbase’s (COIN) price fell more than 9%, while the price of MicroStrategy (MSTR) stocks—which is well-known for holding large amounts of Bitcoin—saw a 13% decrease. In Sweden, the stock price of the cryptocurrency asset management CoinShares recorded a 7.5% decline.
Traditional equities markets also noted sharp drops in Asia and Europe, mirroring the crypto market. The market’s downturn was intensified when US data revealed a weaker economy than previously forecasted.
In the Labor Department’s report released on Friday, job growth was less than projected, and the unemployment rate was higher than projected. Consequently, BTC’s value declined by up to 15%, dipping below $50,000 for the first time since February.
Later on, it rallied to trade at $52,000. Moreover, the stock value of mining companies decreased in tandem with the downturn in Bitcoin’s price decrease. Stock prices of Hut 8 (HUT) and Riot Platforms (RIOT) declined by 12% and 11%, respectively, while Marathon Digital (MARA) and Iren (IREN) noted losses of nearly 14%.