The Price Of Bitcoin Edges Higher After A Dismal February For Risk Assets

Despite the strongest official manufacturing print from China in a decade, bitcoin continued to gain on Wednesday as well as other risk assets after the strongest official manufacturing print of the year got trading started in March.

‍

It was a good day for bitcoin as it climbed 2.4% to $23,704.10 after rising as much as 3.4% earlier in the day. This move comes on the heels of a nearly 1% gain in February, which was a much more modest gain following January's nearly 41% gain. 

‍

The gain follows the shock of a higher-than-expected reading of the Personal Consumption Expenditures data appearing in February, the Federal Reserve's preferred inflation gauge, which showed that prices remain stubbornly high despite the government's efforts. After the release of the data, markets reassessed their outlook for interest rates after the US central bank had been widely expected to pivot away from the aggressive policy in the not-too-distant future. 

‍

In recent days, the coin has been gaining ground due to notably strong manufacturing data coming out of China.

‍

"Despite the fact that many investors are skeptical of Chinese data, the stronger-than-expected PMI in February animated the animal spirits in the market and bolstered risk-taking appetites," Marc Chandler, managing director at Bannockburn Global Forex, wrote in a note to clients on Wednesday. 

‍

Trade Algo reports that the Manufacturing Activity Index, which is a measure of manufacturing activity in China, rose to 52.46 in February, the highest reading since April 2012, according to the National Bureau of Statistics. At 56.3, it exceeded expectations of 50.5 in terms of service activity. A score of 56.3 for services activity was higher than the expectation of 55.0 for services activity. 

‍

"Being one to not miss out on a chance to take advantage of a peak in risk appetite, bitcoin traded more than 2% higher" during Wednesday's session,” according to a note by Oanda senior analyst Craig Erlam. 

‍

“After failing to break key resistance levels – $24,500 – and $25,500 – in the middle of the month, the price appears to have consolidated around late-February lows in recent days. As a result, that could indicate weakness, at least for the short term, although ultimately it is almost impossible for that to happen if risk appetite continues to improve." 

‍

In the Chinese stock market, the Hang Seng Index rose more than 4% as Chinese stocks bounced higher.

‍

Among the risk-on assets, copper was another one that gained ground, climbing 1.2% to $4.14 per pound on prospects of higher Chinese demand for this metal, which is used in the construction of infrastructure projects.

‍

Chandler noted that nearly all emerging market currencies were up, including the Chinese yuan, which posted its largest gain of the year, and the Mexican peso, which hit a five-year high for the first time.

‍

However, early gains for US equities have lost steam as the session progressed. Following the publication of the data from Beijing, US-listed Chinese stocks gained, but eventually turned lower after the announcement. Nio is one of the largest makers of electric vehicles in the world, and its stock fell more than 4% following a fourth-quarter earnings miss earlier in the day. 

‍

Stocks in the United States fell early Wednesday following the major indexes on Wall Street losing ground in February. As bond yields jumped last month, investors expect interest rates to remain higher for longer as long as inflation remains stubbornly high, which led to stock prices falling.