When predicting Bitcoin prices, we often rely on external factors such as macroeconomic indicators. Here are some examples of such influences:
Bitcoin is frequently compared to gold, which is considered a safer asset compared to stocks. Gold often rises when the stock market is volatile or declining, while it may fall alongside the stock market during periods of broader economic uncertainty.
Similarly, stock market trends can serve as exogenous variables in Bitcoin price predictions. For instance, if the U.S. stock market rises, investors may also choose to invest in Bitcoin, expecting all markets to rise concurrently. The reverse may also hold: if Bitcoin is viewed as independent of stocks, a stock market downturn could lead to an increase in Bitcoin investments as an alternative asset.
Asset prices are influenced by the amount of money circulating in the market. For example, during the pandemic, almost all asset prices rose due to Quantitative Easing (QE). Interest rates, therefore, play a significant role.
Global interest rates also impact Bitcoin. In 2020, the Yen Carry Trade unwind led to volatility in global markets, as investors who borrowed at Japan's lower interest rates were forced to unwind positions, leading to large capital outflows.
Exchange rates impact Bitcoin because it is a global asset. When Bitcoin prices rise in USD, it may attract investors from other currencies.
Exchange rates also serve as economic uncertainty indicators. For example, a volatile U.S. dollar often signals broader economic instability, which can affect Bitcoin prices.
Copper is often considered a key economic indicator. High economic activity drives demand for copper, leading to price increases. This price movement may precede economic recovery, offering insights that can also be applied to Bitcoin price predictions.
Many other indicators can affect Bitcoin prices beyond the examples listed above. Market sentiment from experts, institutions, and individuals can be influential. Government policies and even satellite data reflecting physical trade activities may also play a role.