A liquidity injection into the crypto market can take place through a direct or indirect channel.
From a macro perspective, the likelihood of a direct liquidity injection via rate cuts currently appears overly optimistic.
Inflation in March rose to 3.3%, the highest level since May 2024. In this context, with inflation remaining stubborn, expectations of monetary easing by the Federal Reserve in the short term seem far-fetched.
Naturally, this shifts the focus to the “indirect” route. As the chart below shows, the U.S. manufacturing sector is in expansion territory for the fourth month in a row, based on the latest survey data.
Notably, the ISM Manufacturing PMI stood at 52.7%, indicating continued growth in economic activity.
The market reaction was very positive.
From a crypto perspective, some analysts have strengthened their confidence in US President Donald Trump after a period of concern driven by inflationary pressures related to the geopolitical tensions surrounding the Iran conflict.
More broadly, the data has led market participants to reinterpret the US environment as one in which the economy is returning to an “expansion phase,” a departure from the post-COVID slowdown regime.
Simply put, strong manufacturing data indicates that the US economy is still growing, liquidity conditions are improving and risk appetite is returning, leading markets to abandon recession fears, in contrast to post-COVID slowdown dynamics.
For crypto, the natural question becomes: is the market starting to resemble pre-COVID style again?
ISM expansion fuels speculation of a 2017-style crypto rally
The comparison to the pre-COVID crypto cycle stems from one main reason.
Notably, the recent PMI reading of 52.7% follows three consecutive months of similar expansion, with the index remaining above the 50 threshold.
Historically, this indicates stronger liquidity phases and improving risk conditions. Importantly, the markets have not seen this continued upward trend of the PMI consistently since the 2020-2021 post-COVID cycle, when macroeconomic conditions remained tight and restrictive.
In this context, crypto analysts are increasingly comparing the current cycle to the 2017 regime. As the chart shows, the ISM PMI stood at 52.7, returning above 51 for the fourth month.
The last two instances of this pattern occurred in January 2017 and September 2020. Both periods preceded multi-month crypto rallies.
However, the market is not yet in a completely bullish regime.
Historically, ISM values above 55 have been aligned with stronger liquidity increases and aggressive crypto market expansions.
While current levels remain below that threshold, four consecutive months of upward movement indicate a gradual shift toward improving risk appetite and an early stage of macro expansion.
Therefore, if ISM breaks above this level, a 2017-style crypto cycle would not be far-fetched.
Final summary
- Rate cuts appear unlikely due to persistent inflation, but manufacturing data continues to point to an improvement in growth and risk appetite.
- ISM above 50 supports crypto strength, and above 55 is historically aligned with strong bull cycles.