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The key crypto currency bitcoin slipped by more than 10 percentage points to $19,565 in the past trading week and dragged the entire crypto market south with it. At the beginning of the week, hawkish statements by Fed Chair Jerome Powell initially caused prices on the financial markets to fall. In the second half of the week, the situation suddenly worsened. In addition to the bankruptcy of the US crypto bank Silvergate (SI), the shutdown of the Silicon Valley Bank (SIVB) by the US authority Federal Deposit Insurance Corporation (FDIC) caused the banking sector in the US and Europe to crash. The US stock indices Nasdaq and S&P500 also lost significantly and slipped to a new monthly low. Several crypto companies such as Ripple Inc., BlockFi and other crypto startups are also affected by the liquidity problems of the SIVB, which serves as the house bank for many tech and startup companies.
Circle was hit particularly hard. The issuer of the stablecoin USDC has deposited almost 8 percent of its cash reserves with the Silicon Valley Bank with around 3.3 billion US dollars. As a result, stablecoin USDC temporarily lost its peg to the US dollar on Saturday. Late on Sunday evening, however, the markets breathed a sigh of relief. The US Treasury, in concerted action with the Federal Reserve Bank (Fed), announced known, to close Signature Bank (SBNY) and to make all deposits of SIVB and SBNY available for a customer bailout. Customers of both banks can have their deposits paid out in full this Monday. The entire financial market shot up as a result. A short time later, USDC also managed its repeg to 1:1 against the US dollar. The Bitcoin price recovered by around 10 percentage points to the $ 22,800 mark in the early hours of the morning. Ethereum (ETH) also gained noticeably along with the entire altcoin market, peaking at $1,620.
The following economic data will be relevant this week
The new reporting week starts tomorrow, Tuesday, with the publication of the final US consumer price indices for February. Updated US producer prices and US retail sales follow midweek on Wednesday. On Thursday, investors are looking forward to the European Central Bank’s next key interest rate decision. In particular, the statements made by ECB boss Justine Lagarde at the subsequent press conference are likely to lead to increased volatility on the financial markets. On the last trading day of the week, investors will focus on the latest inflation data for the euro zone.
US inflation data in focus
Tuesday, March 14, 2023: At 1:30 p.m. (CET), the US Bureau of Labor Statistics will present the final US inflation data for the past month of February. In January, inflation came in at 6.4 percent year-on-year, ahead of the forecast of 6.2 percent, rising more than forecast. For the month of February, the experts are now expecting a decline to 6.0 percentage points. If the analysts’ expectations are confirmed, the stock and crypto market could start a recovery movement after its correction in the last few weeks. On the other hand, if consumer price indices are higher than estimates, the US dollar should continue to gain ground in the short term. In addition, it remains to be seen whether the markets can actually continue to grow despite the rescue operation by the US authorities or whether disillusionment will spread across the market.
Mid-week US producer prices and retail sales
Wednesday, March 15, 2023: At 1:30 p.m. (CET), the current US producer price indices (PPI) for the previous month of February are presented. The market experts expect a month-on-month increase of 0.4 percent. In January, producer prices had already risen by 0.5 percentage points compared to the previous month. If the price increases increase as experts expect, the US dollar should continue to gain strength and could thus provide further headwinds on the stock and crypto market. If, on the other hand, the producer price indices are below the market experts’ estimates, this would reduce the pressure on Bitcoin and Co. and could lead to a bullish price reaction on the crypto market.
Also at 1:30 p.m. (CET) the latest US retail sales for the month of February will be presented. They are considered an important measure for calculating the purchasing mood of private households. In the last month of trading, US retail sales were up 3.0 percent, well above expectations of 1.8 percent. For the month of February, the expert estimate of -0.3 percent is well below the value from the previous month of January. If the buying mood of private households is above the analyst forecast, this could additionally fuel the price recovery on the stocks and crypto market. If, on the other hand, the published retail sales are below the estimates of the experts and fall back into negative territory, this would be a renewed indication of a slowdown in the US economy. Recently, weak retail sales have had a negative impact on stock market prices as well as in the crypto sector.
Key rate decision by the European Central Bank
Thursday, March 16, 2023: At 2:15 p.m. (CET), market participants are looking towards Europe. The ECB announces its second interest rate decision in the new trading year. In view of the persistently high inflation rate in the euro area (most recently 8.5 percent), analysts expect a further interest rate adjustment of 50 basis points to 3.50 percent. A lower increase of only 0.25 percentage points would lead to price fireworks on the financial markets in an initial reaction. The euro is likely to fall against the US dollar. The market players will pay particular attention to the subsequent press conference at 2:45 p.m. (CET). Any statement by ECB President Lagarde on the evolution of monetary policy action in Europe will be closely watched by investors.
Inflation data from Europe at the end of the week
Friday, March 17, 2023: At 11:00 a.m. (CET), the final consumer prices for the euro area for February will be presented. In the advance release on March 2, inflation data in Europe came in at 8.5 percent, slightly above expectations of 8.2 percent. This forecast for the final data remains unchanged at 8.5 percent. If the figures for the previous month remain at this level and even fall below, the market should react positively and both equities and cryptoassets should appreciate.
If, on the other hand, the rate of inflation is higher than analysts’ expectations, prices on the financial markets could correct again. Since the core inflation rate recently rose by 0.3 percent to 5.6 percent and thus increased more than experts had expected, it shows that the pressure on consumer prices remains at a high level. The final core inflation rate in February is unchanged from the preliminary estimate at 5.6 percent.
