Trump’s Impact on Bitcoin and PMI’s Insightful Roadmap Ahead

Since reaching a staggering peak of over $109,000 on Inauguration Day, Bitcoin has experienced significant fluctuations, crashing to around $78,000 in late February before rebounding to $96,000 shortly after. However, just 24 hours later, those gains were entirely wiped out, a move some analysts attribute to potential market manipulation. Despite this short-term volatility, understanding Bitcoin’s future trajectory can be achieved by examining the business cycle and global liquidity trends.

Understanding the PMI and Its Significance

As of February, both the business cycle and global liquidity are on the rise. For over seven decades, the Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) has served as a crucial tool for assessing the health of the U.S. economy. Each month, ISM releases separate manufacturing and non-manufacturing PMIs to evaluate the performance of goods-producing and service-producing sectors. Economists tend to focus more on the manufacturing PMI, viewing it as a leading indicator of the broader economy due to its sensitivity to demand fluctuations.

How PMI Data is Collected

The PMI data is derived from both quantitative and qualitative assessments made by purchasing managers—executives responsible for procurement in various industries. This survey captures their perceptions of overall business conditions, new orders, export demand, inventories, work backlogs, and employment trends. The results are compiled into a single index that ranges from 0 to 100, with 50 marking the threshold between economic expansion and contraction.

Recent Trends in PMI

After 26 consecutive months of contraction, ISM’s manufacturing PMI surged above 50 in January and maintained this critical level for a second consecutive month in February. Although overall demand remains relatively weak, many panelists have noted the initial operational shock from the new administration’s tariff policy. This trend change in PMI is significant within the broader context of the business cycle.

Supporting these observations, S&P Global Market Intelligence noted that PMI data has accurately predicted every turning point in earnings over the past 14 years. Macro analyst TomasOnMarkets explains, “Strong economic growth, robust corporate earnings, and a low probability of recession enable investors to ‘move out along the risk curve.’”

Bitcoin’s Price Movements and the Business Cycle

When viewed through the lens of the PMI, much of the confusion surrounding Bitcoin’s truncated cycle in 2021 dissipates. This cycle lacked the blow-off top that many industry veterans anticipated. In 2021, Bitcoin’s price peaked in tandem with the business cycle. With the business cycle now on an upward trajectory, analysts like Pal predict that Bitcoin could reach its next peak in late 2025 or early 2026. This anticipated cycle peak is expected to align with the ISM business cycle’s historical peaks, which typically fall within the high 50s to low 60s.

The Role of M2 Money Supply

The turning point in the business cycle is also being influenced by an increasing M2 money supply, which represents a broad measure of the money circulating in the economy. Research from Real Vision indicates that it takes approximately 10 weeks for Bitcoin’s price to reflect changes in global M2. Analyst Colin Talks Crypto has mapped out 46-day and 72-day shifts in global M2 that impact Bitcoin’s price, with his latest analysis favoring the latter timeline.

As Bitcoin continues to navigate these complex economic waters, understanding the interplay between the PMI, business cycles, and global liquidity will be crucial for investors and enthusiasts alike. For more detailed insights, you can read the original article here.