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As the U.S. economy continues to be fraught with recent macroeconomic drama and confusion, investors are turning to Bitcoin (BTC) and other leading cryptos to find safety in these turbulent times. Bitcoin remained resilient, surpassing $27,000, despite positive jobs data, inflation concerns, and rising yields. Stocks responded well, but Bitcoin’s lack of reaction fueled speculation about its safe-haven status.

Bitcoin and Ether Liquidity Drop, Altcoin Liquidity Declines

Amidst the bustling U.S. stocks market on Fridays, there were notable movements in the crypto world. Despite significant macroeconomic events, including a strong jobs report, BTC saw a 1.2% increase on Friday. Other major cryptos garnered similar gains, while DeFi tokens surged significantly. U.S. stocks responded positively to the report, while gold prices dropped. The CoinDesk Market Index (CMI), which measures overall crypto market performance, was up roughly 1.8%.

ETH, the second-largest cryptocurrency, is up over 1% and trading around $1,830 in the crypto market. Meanwhile, altcoins like Lido (LDO) and The Graph’s GRT token jumped 11% and 12%, respectively, in the past 24 hours. Kaiko’s report showed a 4% drop in BTC’s market depth and a 2% decline in Ether’s liquidity. Altcoin liquidity faced an even worse condition, down roughly 17% since last month.

Fed Faces Tough Decision on Interest Rate Increase

Reacting to the macroeconomic situations, Oanda’s Edward Moya wrote that the U.S. Federal Reserve “faces a difficult decision on a June interest rate increase after indicating it was open to a stoppage and might be influenced by the upcoming Institute for Supply Management (ISM) and May Consumer Price Index releases.” He stated that the current economy does not show strong signs of a second-half recession. His remarks imply a potential market shift with a pause in rate hikes and a dovish shift.

In a time of poor asset performance, Bitcoin is becoming a preferred choice for investors due to its independence. Mark Connors, head of research at 3iQ, holds the Federal Reserve responsible for the recent banking crisis. This has led to a growing focus on other asset types, such as digital currencies, to pick up the slack. Connors predict a dovish Fed policy could drive investors to the crypto market for diversification and profit.

Cryptocurrency Market as a Safe Entry Point for Risk-Averse Investors

Although the original function of Bitcoin was to be a mere digital payment system, the cryptocurrency has been proving its resiliency as a safe haven asset again and again, maintaining its steadiness during times of uncertainty, high inflation, and global economic instability. This year, Bitcoin blockchain transactions are on track to exceed 2013 levels. Observers suggest that Bitcoin could reach the same peak in the next bull run, implying a possible rate correction.

Wednesday’s U.S. inflation report will be crucial in determining the potential rate correction. Investors across the board are closely watching the CPI report for clues about how the U.S. Federal Reserve will act at its next policy meeting in June, where the central bank may pause the steady diet of rate hikes that have been bedeviling crypto markets.

Regardless of the outcome of the U.S. Federal Reserve’s policy meeting, the cryptocurrency market remains a relatively safe entry point for risk-averse investors who want to diversify their portfolios beyond traditional markets. Cryptocurrencies as payment and safe-haven assets may bring substantial rewards to investors in the coming months and years.

Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

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Kassidy Florette
Kassidy followed her friends to buy her first Bitcoin in 2015, has been participating in various projects since 2019 as a marketing communication lead. Her knowledge and passion brings her in as a contributor.