Bitcoin Not Sensitive To Macroeconomic Signals: New York Fed

The New York Federal Reserve states, in a recently published study, that the bitcoin price is not appreciably affected by macroeconomic events and announcements that usually affect other asset classes.

He reporttitled The Bitcoin-Macro Disconnectholds that the price of bitcoin has a low correlation with indicators of economic activitysuch as the unemployment rate or the evolution of interest rates, as well as in general with macroeconomic news.

“Given the relatively recent development of cryptocurrency exchanges, we restricted our sample to the period from 2017 to 2022, starting from the period in which Bitcoin possibly reached a more mature stage,” the report says in its introduction.

In the study, the authors analyzed the impact of specific macroeconomic factors on the price of BTC. Factors specific to the cryptocurrency industry were not taken into account in the study.such as the collapse of FTX.

The report considers three categories regarding the macroeconomic factors addressed. News about inflation, such as the Consumer Price Index or CPI, were taken into account; news about monetary policy, such as interest rate increases; and news about unemployment statistics and other metrics of the economy.

A sample of the bitcoin price reaction to macroeconomic announcements is shown in the charts below. At the top are the movements of the main currencies (left) and the behavior of bitcoin before the announcement of the figures on unemployment in the United States, on June 3, 2016. At that time the unemployment rate fell more than expected. than expected, with the creation of 287,000 jobs in June.

As seen in the graph at the top right, the price of bitcoin (in black), remains with a variation of less than 0.5% in the first two hours after the announcement. In contrast, gold and silver prices are up more than 1.5% almost immediately after the announcement, with gold topping 2% in the aforementioned period.

The two graphs at the bottom evaluate the reaction to an announcement by the US Federal Reserve in June 2021 that was considered bearish for the markets: the increase in interest rates. As can be seen, although BTC lost 2% in the minutes after the announcement, it ended the study period down 1%, while gold and silver fell more than 1.5%.

This type of study was carried out by the authors of the report on the occasion of the important macroeconomic announcements for the period 2017-2022with similar results.

Most macroeconomic announcements, including retail sales, nonfarm payrolls, trade balance, CPI, and PPI, have a statistically significant effect on all asset prices (dollar exchange rates, metal prices prices and US stock prices), except in Bitcoin.

New York Federal Reserve.

The report highlights an exception in terms of inflation figures, since it states that except for the CPI, or consumer price index, the rest of the indicators have a minor effect on bitcoin. In other words, major stock indices and assets like gold and silver respond to macroeconomic news with significantly larger magnitude ratios than bitcoin.

For the authors, this difference between the impacts of macroeconomic news on the bitcoin price is described as “disconcerting”. They also caution that given the limited sampling used, more evidence is needed to assess the disconnect between Bitcoin and macroeconomic fundamentals.

Regarding the increases in interest rates, considering time windows beyond a few hours, there have been impacts on the price of BTC, according to an analysis by CriptoNoticias in July 2022. However, the impact is not It was uniform for the rate increases between March and July, since in some opportunities they resulted in a price rise, while in others a decrease was registered.

When the inflation figures for January 2023 were revealed, on February 14, bitcoin was coming from a price decline, before the Fed announcement. Subsequently, the upward trend of BTC has continued, although it could be due to expectations from investors related to the bullish price action already underway and not to the slight decline in inflation in January.

At the time of writing, bitcoin is trading at $24,859, following up on its recent attempts to break the $25,000 resistance, which have so far proved unsuccessful, as reported by CriptoNoticias.