Central Bank Interest Rate Decisions
Inflation Rate
Unemployment Rate
GDP Growth
Balance of Trade

Fundamental analysis is used to assess the valuation and future price trends of different asset classes, such as fiat currencies, commodities and equities. But this approach is complex, when it comes to evaluating cryptos. Firstly, the cryptocurrency markets change quickly, so fundamental analysis, in the short term, can be unreliable. Rather, the market depends on long term viability of the underlying technology, depending on factors like adoption rates, scalability, breaking news and network events. Mining supply also plays a part. 

The decentralised nature of cryptocurrencies also means that they remain unaffected by fiat monetary and fiscal policies. So, economic data also should not impact coin prices, except that it does. Cryptocurrencies like BTC, due to their deflationary model, are considered safe-haven assets during market downturns. This has been the reason for the tremendous surge in BTC prices during the volatile and uncertain climate of Covid-19. When traditional asset classes seem unworthy of investment, traders enter into crypto positions, to hedge against inflation and market risk. This, in turn, increases demand and, thereby, prices of cryptocurrencies. 

Here are 5 economic indicators that can impact crypto prices.
 

Higher interest rates lead to appreciation of fiat currency prices, while a lower interest rate environment is bearish for them. A major factor for the rise in BTC and other coin prices in 2020 has been a low interest rate environment, put in place to tackle the Covid-19 induced financial crisis. This has led to major currencies, like the US Dollar, Euro and the British Pound, depreciate in value against crypto assets. In a dovish environment such as this, investors can further sell fiat currencies and buy crypto assets instead, driving the latter’s prices higher. 
 

The Consumer Price Index (CPI) measures the average change in prices over time, which consumers pay for a basket of goods and services. It is a measure of inflation. The inflation rate is influenced by interest rates, both of which have an inverse relationship. An increase in fiat currency supply, due to investors shorting a currency in huge drives or capital outflows from a currency, also causes inflation. At the same time, dividend paying stocks become less attractive with an increase in inflation, which hampers the purchasing power of a currency.  

Cryptocurrencies like Bitcoin act as an inflationary hedge during such times. This is due to their controlled supply and their value coming mostly from speculative interest. 
 

Although the unemployment rate doesn’t directly impact crypto prices, it impacts central bank monetary policies. Increase in inflation has been found to be related to a decrease in the unemployment rate, as money supply is distributed more evenly and spent among the employed. Employed people might also have more bargaining powers, leading to a rise in average wages. Central banks have a mandate to control inflation beyond a certain target. One way to do that is to tighten monetary policies by raising interest rates. 

Interest rates can impact fiat investments and, thereby, influence traders’ decisions to invest in cryptos. Economic reports, like the US Non-Farm Payroll data, can cause huge volatility in the fiat markets. Unfavourable jobs data can be seen as a grim forecast for the US economy and the US Dollar, raising the appeal of BTC. 
 

The relationship between GDP and cryptocurrency prices is based on the theory of how cryptocurrencies can fare in a recession. Consecutive contraction in two or more quarterly GDP growth figures is considered as a sign of recession. Bitcoin has been found to show traits of a safe-haven commodity, like gold, during times of recession, due to its inherent fixed supply and decentralised nature. It performs independently of the pressures from the broader market. Other assets that have shown similar traits include Ripple (XRP), as its functions are outside the purview of the mainstream financial markets. 
 

The trade balance of a nation impacts currency rates. Rise in imports against export values makes a currency less appealing to investors. Similarly, countries that have huge demand for their products overseas tend to have higher demand for their currency too. This appreciation and depreciation in currency values can impact price trends of crypto pairs that involve fiat currencies. 

As of February 2020, over 58% of cryptocurrencies showed a high positive correlation (of higher than 60%) with BTC prices. So, when BTC prices climb higher during bullish trends, riding high on unfavourable economic data, other coins rise too. Some examples of such alt coins are Ether (ETH), Monero (XMR), EOS and Bitcoin Cash (BCH). This is why it is important to keep track of economic data releases to form useful crypto trading strategies.