The role of economic indicators in the prediction of cryptocurrency market trends
The growth of cryptocurrency was nothing meteoric, and prices varied greatly and unpredictable in a few hours. While many praised the decentralized nature of cryptocurrencies as a liberating force for people around the world, few recognized the key role played by economic indicators in the configuration of market trends.
What are economic indicators?
Economic indicators are indicators that follow the health and results of the economy, providing information about their general condition. These indicators can be divided into several categories, including inflation rates, GDP growth, interest rates, employment number and shopping balances. When analyzing these indicators, economists and investors, they can better understand how market conditions can affect.
Relationship between economic indicators and cryptocurrency prices
Cryptocurrencies are known for their high variability, and prices often experience rapid fluctuations in response to various economic events. While many cryptocurrencies were associated with growth and speculative madness, others experienced violent deterioration after the decline of the entire economy.
Some key economic indicators related to cryptocurrency market trends include:
- Inflation indicators : With the increase in the inflation rate, investors become more optimistic about future investment yields. When inflation is high, central banks can be forced to increase interest rates to reduce demand and slow down economic growth.
- GDP growth : A strong GDP growth rate can indicate a healthy economy, which leads to greater investor confidence and potentially higher prices of cryptocurrencies. And vice versa, a poor GDP growth rate may indicate the deterioration of the economic situation, which can lead to lower prices.
- Interest rates : Changes in central banks by central banks can affect the results of cryptocurrencies, which are strongly associated with permanent income markets. For example, when interest rates grow in countries with strong economies, it can make cryptocurrencies like bitcoin less attractive to investors looking for high yields.
- Employment number
: A strong increase in employment and employment number can indicate a healthy economy, which leads to greater investor confidence and potentially higher prices of cryptocurrencies.
- Commercial balance : A surplus of a commercial deficit or a commercial surplus can indicate the imbalance in the global economy, which can lead to changes in cryptocurrency prices.
Real examples of economic indicators and cryptocurrency prices
Here are some real examples that illustrate how economic indicators influenced cryptocurrency market trends:
- 2013: The Rise of Bitcoin
In 2013, when GDP growth in China fell significantly, the price of bitcoins increased rapidly, reaching the highest level. This is mainly due to the combination of factors, including the greatest interest in investors and speculation.
- 2018: USA-China Commercial War
During the United States and China commercial war in 2018, Juan Chino violently wrapped the US dollar, which led to a greater demand for cryptocurrencies such as Bitcoin and Ethereum. As a result, prices increased rapidly.
- 2020: Pandemic Covid-19
In response to the Covid-19 pandemic, many central banks around the world have implemented emergency funds to support economies, including negative interest rates and tax stimuli packages. This led to growing investors in cryptocurrencies, such as Bitcoin, which increased its price significantly.
Application
The relationship between economic indicators and cryptocurrency prices is undeniable, with each indicator plays an important role in configuration of market trends.