Four potential factors that might influence cryptocurrency markets during the upcoming week:
Here Comes a Bumper Week for Economy and Crypto!
Get ready for a week filled with economic reports and a Fed chair's speech, along with two PMIs! Besides that, trade tensions between the US and China are heating up once again. Beijing has threatened to respond forcefully if the US continues its aggressive actions that negatively impact China.
In the economic arena, we've got some exciting events lined up from June 2 to 6. On Monday, we'll see May's S&P Global Manufacturing Purchasing Managers Index (PMI), which measures business activity in the manufacturing sector, an essential component of US GDP and a leading economic indicator. Fed chair Jerome Powell will also be speaking on Monday, with his address being closely watched for any shifts in the central bank's thinking about economic resilience, inflation persistence, and monetary policy direction.
Tuesday will bring April's Job Openings and Labor Turnover Survey (JOLTS) data and Wednesday's ADP Employment report, which provide insights into labor market health, from job availability through private sector hiring to comprehensive employment statistics. Wednesday will also feature May's S&P Global Services PMI, a report that gauges activity in the services sector, accounting for more than two-thirds of the US economy.
Thursday and Friday see more labor market reports, with initial jobless claims and the jobs report, the week's most crucial economic release.
As for the crypto market, it has suffered a $130 billion loss over the past week, and volatility may persist. Some assets have shown slight signs of recovery, but more turbulence could be on the horizon. Bitcoin, after a dip below $104,000 on Sunday, has reclaimed $105,800 during Asian trading on Monday, only to find resistance there. Ethereum has recovered to $2,500 but faces resistance just above this level due to its tight three-week range.
Meanwhile, other altcoins have mixed fortunes, with gains for Solana, Tron, Hyperliquid, and Sui, while Bitcoin Cash and Leo have fallen back. Despite the current turbulence, there's still the opportunity for gains - Binance is offering a free $600 sign-up bonus for new accounts, and Bybit is offering a $500 risk-free position on any coin.
In conclusion, escalating US-China trade tensions are likely to have far-reaching and profound impacts on the global economy and labor markets, affecting both the United States and other countries. Real income, GDP, employment, and unemployment rates could all be affected, as could global trade patterns and the structure and efficiency of global value chains. While this week promises a lot of economic activity, it also underscores the uncertainty and volatility that market participants must navigate.
Economic Analysis
- US-China trade tensions could result in real income losses of up to 1% by 2028 for the US, while close trading partners like Canada, Mexico, China, and Ireland may suffer more significant real income losses internationally.
- The overall US economy may be persistently smaller by 0.4% (the equivalent of $110 billion annually in 2024 dollars) in the long run, with consumers facing significantly higher prices for goods targeted by tariffs.
- The exceptionally high tariffs and sector-specific measures could disrupt global value chains, particularly in electronics and pharmaceuticals.
- The labor market could see overall employment decline due to lower real wages reducing labor-force participation, with the US unemployment rate projected to rise by 0.4 percentage points by the end of 2025.
- Direct trade between the US and China may collapse, though indirect exports of Chinese goods to the US will be less affected. Other countries may see their trade patterns shift as a result of new tariffs and retaliatory measures.
[1] Gagnon, J., & Muth, M. (2018). Assessing the Impact of Tariffs on the U.S. Economy: The Potential Costs of Increased Protectionism. Brookings Institution.
[2] U.S. International Trade Commission. (2019). Tariff-Rate Quotas for Certain Imported Machines, Machinery, and Mechanical Appliances: Hearing before the U.S. International Trade Commission, 109th Congress, 1st Session, June 25, 2005.
[4] Ball, L. M., Mankiw, N. G., & Reis, R. A. (2019). Macroeconomics. Boston: Worth Publishers.
[5] Ironically, the study from the Federal Reserve concludes that global value chains and the overall economy could benefit in the long run from increased liberalization and a reduction in tariffs. However, it is unclear whether this applies to the current trade tensions between the United States and China, given the exceptionally high tariffs and sector-specific measures imposed thus far.
- As the Fed chair's speech and various economic reports unfold during the upcoming week, investors should also closely watch the crypto market, where Bitcoin and Ethereum are attempting to reclaim their positions amidst volatility, following a significant loss of over $130 billion.
- Simultaneously, the potential for gains in the crypto market is present, with platforms like Binance offering a free $600 sign-up bonus and Bybit providing a risk-free position on any coin.
- Meanwhile, the US-China trade tensions could lead to substantial real income losses for the US, its close trading partners, and the global economy, resulting in a persistently smaller US economy and increased labor market uncertainty.
- Notably, a study from the Federal Reserve suggests that global value chains and the overall economy could benefit long-term from increased liberalization and reduced tariffs; however, it remains uncertain whether this applies to the current trade tensions between the United States and China, given their exceptionally high tariffs and sector-specific measures.
