Bitcoin's trajectory is facing headwinds despite a surprisingly strong signal from the U.S. manufacturing sector. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) jumped to 52.6 in January, exceeding expectations and marking the first expansion in over a year. This has led to diverging views on whether Bitcoin can capitalize on what some are calling a "reflation" trade.
A PMI above 50 indicates expansion in factory activity, reflecting business confidence and forward-looking demand. The breadth of the January rebound was notable, with new orders surging to 57.1 and production climbing. Historically, Bitcoin and other risk assets have trended upward during sustained expansion environments, with crypto communities often interpreting positive PMI data as a shift towards opportunistic investment.
However, Bitcoin's recent performance paints a more complex picture. The cryptocurrency has been attempting to stabilize after experiencing a sharp sell-off, which pushed prices below $80,000 for the first time since April 2025. Bitcoin briefly fell near $75,000 amidst liquidations before rebounding to around $78,400 early this week. Despite the rebound, Bitcoin remains down roughly 12% over the past week, wiping out over $200 billion from its market capitalization. This decline is part of a broader drawdown of approximately $800 billion since Bitcoin peaked above $126,000 in October.
Some analysts, like Andre Dragosch from Bitwise, see the PMI data as a sign of "reflation," arguing that such macro environments have historically been associated with Bitcoin bull runs. Crypto analyst Michaël van de Poppe also emphasized the correlation between PMI and Bitcoin price strength in recent years. The argument is that expanding manufacturing activity indicates improving corporate earnings, stronger demand, and greater investor confidence in risk assets.
Despite the optimism, Bitcoin is struggling to maintain its correlation with the resurgent PMI. A potential bearish divergence between the PMI and BTCUSD is active. This suggests that despite the positive macro data, Bitcoin's internal dynamics and market sentiment may not be fully aligned for a significant rally.
Adding to the cautious outlook, Bitcoin's recent struggles coincided with a global risk-off move, and it remains to be seen whether the positive PMI data will be enough to sustainably boost Bitcoin's momentum. While a single data point cannot guarantee a turnaround, a lasting expansion could provide a tailwind for Bitcoin.