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The United States manufacturing sector has officially returned to expansion territory, posting a strong performance that analysts suggest could trigger a macroeconomic shift reminiscent of the 2020 bull market. While cryptocurrency technical indicators remain bearish in the short term, the resurgence in economic activity—combined with renewed institutional interest—may signal a pending reversal for risk assets, despite the current disconnect between equity and crypto markets.
Key Points
- Manufacturing Resurgence: The ISM Manufacturing PMI hit 52.6%, marking a return to expansion after more than two years of contraction.
- Crypto vs. Macro Divergence: While US stocks and manufacturing data show strength, Bitcoin and Ethereum remain deeply oversold, with key technical support levels under pressure.
- Institutional Inflows: Bitcoin ETFs recorded $500 million in daily inflows following a week of significant outflows, suggesting hesitant but returning Wall Street interest.
- Valuation Discrepancy: Macro guru Raoul Pal suggests Bitcoin is trading at a massive discount relative to global liquidity, estimating a fair value of approximately $160,000.
Economic Indicators Signal Expansion
For the first time in 26 months, the ISM Manufacturing PMI has broken above the critical 50% threshold, landing at 52.6%. In economic forecasting, a reading above 50 indicates expansion within the manufacturing sector. This breakout smashed analyst predictions and signals that the US economy is accelerating after a prolonged period of contraction.
Historically, an expanding PMI correlates with favorable conditions for risk assets. Market cycles often top out when the PMI reaches the 60-65% range, a process that typically spans 11 to 16 months from the initial breakout. This timeline suggests that while the immediate "vibes" in the crypto market are bearish, the medium-term macroeconomic backdrop is shifting toward a "boom" phase.
This economic optimism is further evidenced by the impending wave of Initial Public Offerings (IPOs). Technology companies are reportedly preparing to list roughly $13 trillion in value over the next 6 to 18 months, aiming to capitalize on anticipated favorable market conditions before any potential future downturn.
Cryptocurrency Technicals Under Pressure
Despite the positive macroeconomic signals, the technical landscape for digital assets remains precarious. Bitcoin (BTC) and Ethereum (ETH) are currently lagging behind traditional equities, which are hovering near all-time highs.
Bitcoin recently saw a high-volume trading day but remains in oversold territory. Analysts warn of a potential "bear flag" formation, which could result in a further drawdown if buyers do not step in aggressively. The critical support level to watch is the 200-week Exponential Moving Average (EMA), currently sitting at approximately $68,000.
Ethereum faces a more challenging setup, having already dipped below its 200-week EMA. The asset recently faced a rejection at the 20-day EMA, a bearish signal that often precedes further consolidation. Similarly, Solana is testing a crucial support zone around $102. A failure to hold this level could see prices retreat toward the $80 mark.
Institutional Flows and Fair Value Models
The divergence between price action and underlying value is a key topic of debate among institutional investors. According to liquidity models cited by macro expert Raoul Pal, Bitcoin is currently trading at a steep discount.
"The map as NASDAQ did perfectly. Bitcoin today should be at $160,000. That's the discount we are to fair value according to liquidity... It was a technical year because of what happened. It should have been a lot stronger."
Wall Street activity reflects this uncertainty. After seeing $1.5 billion in outflows last week, Bitcoin ETF products recorded a reversal with half a billion dollars in inflows yesterday. While this is a positive development, consistent inflows are required to confirm renewed institutional confidence.
Broader Market Implications
The disparity between asset classes is stark. The S&P 500 and Nasdaq continue to grind higher, fueled by the economic expansion data, while gold is recovering from a dip, currently retesting its 50-day EMA. Historically, crypto markets eventually align with broader liquidity cycles, but the current lag is significant.
Analysts are also closely monitoring the political and monetary landscape. Speculation regarding future Federal Reserve policy suggests a potential shift toward lower interest rates and a "hot" economy under future administrations. Such an environment would typically act as a catalyst for hard assets and speculative technology, potentially closing the gap between the current suppressed crypto prices and the booming equity markets.
Investors should closely monitor the ISM PMI trend and ETF flow data in the coming weeks. If the economic expansion sustains and Wall Street inflows stabilize, the current technical weakness in crypto may prove to be a lagging response to a shifting macroeconomic tide.
