Bitcoin keeps moving with no clear direction in the first week of 2023. Following a rejection from a critical resistance zone, the cryptocurrency returned to its range and could be gearing up for a re-test of support.
In the meantime, altcoins are blooming, with many recording profits on high timeframes. As of this writing, Bitcoin (BTC) trades at $16,700 with sideways movement in the last 24 hours. In the previous seven days, BTC records similar price action.
BTC In The Short Term, What’s Driving The Price Action?
Bitcoin is reacting to macroeconomic developments and the U.S. Federal Reserve (Fed) monetary policy in the short term. As NewsBTC reported yesterday, investors are hesitant to trade in any direction due to uncertainty around global markets.
The situation is likely to persist during January. Today the U.S. released new economic data, but with “mixed” results, according to a pseudonym analyst:
Economic Data a bit mixed. More jobs than expected but lower hourly earnings which is the second most important number I’d say. The matter in which the market will digest this is the most telling factor in my opinion.
The unemployment rate in the United States printed 3.5% for December 2022, which came much lower than the market expected. The Fed uses this metric to gauge the efficacy of its monetary policy.
The higher unemployment, the more they can tame inflation, but the U.S. job market has been resilient and has remained strong despite the Fed’s intentions. In that sense, Bitcoin and risk-on assets reacted with small losses.
The lower-than-expected results in unemployment provide room for the Fed to continue tightening. However, the risk of an economic recession increases as the financial institution pushes on to bring down inflation.
Bitcoin Will Make It During A Recession?
In a recessionary economic scenario, Bloomberg Intelligence Senior Macro Strategy, Mike McGlone, believes Bitcoin will thrive. The analyst is bullish on BTC for the long term but shared some reservations about its immediate future.
McGlone expects Bitcoin to revisit critical support at around $10,000 to $12,000 in an economic recession. This massive crash will ripple across the nascent industry and operate as the final catalyzer for another rally. The analyst said:
The rising potential for a severe global economic slowdown may be a top crypto performance factor in 20222. Out bias is that Bitcoin is more likely to come out ahead in most scenarios (…).
If this scenario continues, the cryptocurrency could start trading as Gold and a store of value assets, similar to its performance from 2020 to 2021. Right now, BTC trades as a risk asset, but the status quo is poised for a change as the global economy enters a critical stage.