The cryptocurrency market is known for its high volatility, but not all fluctuations come from internal market information. In reality, most significant price movements in the current market originate from macroeconomic information and factors.

Therefore, understanding macroeconomic indicators and geopolitical events is essential for any serious investor participating in the market. In this article, Allinstation will provide a comprehensive overview of macroeconomic factors and how they can impact price trends.

Why Do Macroeconomic News Affect the Market?

Although crypto was built with a "decentralized" vision, in reality, investment capital still depends on central bank policy decisions and the global economic situation. Factors such as interest rates, inflation, employment, and GDP growth directly affect risk appetite and capital flow - two key factors in the crypto market.

A few basic principles help explain this connection:

• When interest rates rise, borrowing costs are higher, and capital flow into risky assets like crypto tends to decrease.
• When inflation is controlled, expectations of the FED slowing down interest rate increases will help risky assets recover.
• When the economy weakens (GDP declines, poor employment), investors tend to seek alternative or speculative assets, including crypto.

Important Macroeconomic Indicators Affecting the Crypto Market

Consumer Price Index (CPI)

If you're new to the crypto market, you might have heard people say "CPI is coming out tonight, be careful, Bitcoin might dump!" or "Low CPI, BTC will fly".

So what is CPI - Consumer Price Index? It is used to measure the price increase of goods and services that Americans use daily, such as food, housing, gasoline, electricity, medical services...

Simply put, the higher the CPI, the more expensive living costs become, which means inflation is rising.

This is the most important indicator for the FED (US Central Bank) to decide whether to increase interest rates or not.

Here's the main connection:

• CPI higher than forecast → FED fears inflation → increase or maintain high interest rates → money becomes "expensive", people will withdraw from risky assets like Bitcoin → BTC price likely to drop.
• CPI meets expectations or lower than forecast → FED sees inflation decreasing → might reduce interest rates → money becomes cheap again → investors pour money into risky markets → Bitcoin could surge strongly.
• CPI > expectations → Bad news → Bitcoin likely to drop
• CPI = expectations → Good news → Bitcoin might increase slightly
• CPI < expectations → Very good news → Bitcoin likely to surge strongly

In November 2023, the US announced a CPI lower than expected (only 3.2% instead of 3.7%). The market immediately expected that the FED would no longer increase interest rates, and might even cut them in the near future.

In just 2 weeks after the announcement, Bitcoin rose from around 26,000 USD to over 30,000 USD - clearly showing the significant impact of the CPI on BTC price.

• CPI is usually announced in the first half of each month, typically on Tuesday or Wednesday, at 19:30 (Vietnam time).
• Before the announcement, BTC price might remain stable or fluctuate strongly, as investors are "guessing" the CPI result.
• CPI is not just an economic number, but can be a signal predicting Bitcoin's price trend in the short term.

Generally, decreasing inflation = good for the crypto market. Increasing inflation = be careful. However

FED Interest Rate (FOMC Meeting)

FED interest rate, or more specifically, the federal funds rate, is the interest rate that the US Federal Reserve (FED) decides after each meeting of the FOMC – Federal Open Market Committee.

Simply put, this is the basic interest rate for the entire US financial system – a benchmark that banks, enterprises, and even other countries look at.

• When interest rates increase, borrowing costs are higher, less money in the market makes investment more expensive → money flow is "pulled back".
• When interest rates decrease, borrowing becomes easier, spending and investment increase → more money is "pumped out".

Therefore, the FED's interest rate policy is extremely important for the global financial market – including Bitcoin.

Here is the main connection:

• FED increases interest rates → money becomes more expensive → investors are risk-averse → shift to safe assets like USD, bonds → Bitcoin may decrease or remain stable
• FED maintains or decreases interest rates → money becomes cheaper → investors seek higher returns → pour money into risky assets like Bitcoin → Bitcoin may surge strongly

Especially, even if the FED takes no action, but if they signal an upcoming rate cut, the market will also react positively.

• Rate increase + "hawkish" statement → Bad news → Bitcoin likely to drop significantly
• Maintaining rates + neutral statement → Neutral news → Bitcoin shows little movement or slight increase
• Rate cut or "dovish" statement → Good news → Bitcoin likely to surge strongly

• Join Telegram channels like HC Capital Channel – a place that provides clear and easy-to-understand macro analysis and data interpretation for the community.

Conclusion

Macro indicators such as CPI, FED interest rates, GDP, Non-farm Payrolls... have a clear impact on the cash flow and trends of the crypto market. In an increasingly professional investment environment, crypto investors cannot rely solely on technical analysis or rumors but need to equip themselves with knowledge and quick reflexes to macro news.

Mastering macro factors not only helps you understand the market better but also helps you stay one step ahead in making rational investment decisions.