Bevy of Economic Data Barely Stirs Bitcoin, Ether

BTC$86,455.72 and ether ETH$2,830.80 traded in a compressed range and trading volume was light on Thursday following the release of key U.S. jobs and productivity data.

Bitcoin was lingering just below $28,000, while ether dropped under $1,800, both down about 1.5%.

The third and final estimate for Real Gross Domestic Product (GDP), showed the U.S. economy expanded by 2.6% during the fourth quarter of 2022, slightly below expectations of 2.7% The GDP figure was revised downward from prior estimates of 2.9% and 2.7% because consumer spending and exports were lower than initially calculated.

The Personal Consumption Expenditure (PCE) price index rose 3.7% in the fourth quarter, aligning with the consensus estimate, while initial jobless claims of 198,000 exceeded expectations of 192,000.

Corporate profits declined 2% in the fourth quarter following a decline of less than 0.1% in the previous quarter.

Crypto markets’ quiet response implies investors were largely unmoved by the data, which offered faint encouragement the U.S. economy was contracting, a precursor to lower inflation. BTC traded 0.19% higher during the hour of release, while ETH trimmed its price by 0.9%.

Digital assets have tended to respond more favorably to declining economic signals that would allow the Federal Reserve to scale back its diet of hawkish interest rate hikes and more negatively to indicators that the economy is expanding, usually a harbinger of higher inflation.

The probability of the Fed approving a 25 basis point rate (bps) increase at its next meeting on May 3 leaped from 40% to 50% on Thursday, according to the CME FedWatch tool, which measures rate probabilities.

Crypto investors should particularly note the upward revision in PCE from 3.2% in January because it illustrates the extent to which the Fed's Federal Open Market Committee had been chasing inflation. The current mark aligning with estimates also supports FOMC base case assumptions about a declining economy.

The 2% contraction of corporate profits is an early indication that the labor market is loosening because declining corporate profitability does not lend itself to jobs expansion. The Fed has been deeply concerned about the tight job market, which typically links to price increases.

All told, crypto markets appeared to be quietly digesting Thursday's data amid hints that price increases reflect what the market has already baked in, and that offset inflationary concerns.