Bitcoin's Wild Ride: PMI Signals Economic Turnaround
1min read The first six weeks of U.S. President Donald Trump's second administration have been tumultuous for cryptocurrency markets. Since peaking above $109,000 on Inauguration Day, Bitcoin (BTC) experienced a sharp decline to around $78,000 in late February, only to rebound swiftly to $96,000 a few days later. However, these gains were quickly reversed, with some attributing the move to market manipulation.
Despite the short-term volatility, Bitcoin's trajectory can be better understood through the lens of the business cycle and global liquidity. Both variables are trending higher as of February, providing a roadmap for what lies ahead.
The Institute for Supply Management's (ISM) Purchasing Managers Index (PMI) has been a valuable resource for understanding the health of the U.S. economy for the past seven decades. Each month, ISM releases manufacturing and non-manufacturing PMI data to gauge the health of goods-producing and service-producing economies. Economists place more emphasis on the manufacturing PMI as it is seen as a leading indicator of the broader economy and is more sensitive to changes in demand.
After 26 consecutive months of contraction, ISM's manufacturing PMI jumped above 50 in January and remained above that critical level for a second straight month in February. Although demand remains relatively weak overall, with many panelists experiencing "the first operational shock of the new administration's tariff policy," the trend-change in PMI is significant within the context of the business cycle.
ISM's manufacturing PMI has now been above 50 for two consecutive months, signaling a potential turnaround in the economy. This trend is significant not only for the economy but also for every asset, including Bitcoin. Research by S&P Global Market Intelligence found a 74% correlation between its PMI-based earnings indicator and the earnings of U.S. companies. Additionally, macro analyst TomasOnMarkets noted that strong economic growth, strong corporate earnings, and a low probability of recession allow investors to "move out along the risk curve," which includes Bitcoin.
Viewing Bitcoin within the context of the PMI removes much of the confusion surrounding BTC's truncated cycle in 2021, which lacked the blow-off top that many industry veterans had expected. In 2021, Bitcoin's price basically peaked with the business cycle. With 