By
Bhushan Akolkar
April 16th, 2024
Although Bitcoin has bounced back on Sunday, everything is not very bullish yet. The CPI data coming ahead on Wednesday will ve a key factor in determining the next Bitcoin move.
The world’s largest cryptocurrency Bitcoin (BTC) has had a very poor start to 2022 while moving sideways entirely over the last week. However, Bitcoin witnessed some minor price reversal on Sunday as the BTC price bounced back from the $40,700 level.
As of press time, Bitcoin is trading at $41,973 with a market cap of $795 billion. Previously, Bitcoin was trading at the same levels during the bearish market of September 2022. Crypto trader and analyst Rekt Capital writes:
“Months have passed since September. And yet, BTC finds itself in the same situation, macro-wise. Still consolidating inside its macro Re-Accumulation range. In fact, $BTC is almost at the very same price point at which BTC bottomed on the September retrace.”
While it’s difficult to say anything at this point, the Bitcoin RSI levels suggest that we are currently in the “oversold” territory.
#Bitcoin RSI has been this low just 2 other times in the last 2 years. Looks like a bottom is near and bounce due. Let's see 🤓 pic.twitter.com/qhQ1pD8yEl
— Bitcoin Archive (@BTC_Archive) January 9, 2022
The US Inflation Data Will Be a Key Driver for Bitcoin (BTC)
There’s been a very fundamental in the decision of the Federal Reserve after chairman Jerome Powell said that the inflation is just not “transitory”. The Fed has started taking the rising inflation data more seriously and thus comes its quantitative tightening (QT) measures.
The Fed has already hinted that it will proceed with interest rate hikes three times this year. As Fed has sped up things by initiating the QT measures, things have turned out to be extraordinarily bearish in the equity and the crypto space.
Popular market analyst Alex Kruger makes some interesting analyses here. He writes:
“Balance sheet normalization was not in anybody’s radar for a long time. Not only is this now a possibility in the near term, but also the Fed is talking about doing so faster than in 2018. That’s why crypto assets dropped 15%-30% in two days last week”.
Alëx Kruger further goes on to explain how crypto remains affected as the Fed switches from pumping money in the system to withdrawing money from the system. Kruger explains:
“Crypto assets are at the furthest end of the risk curve. Just as they benefited from extraoridnarily lax monetary policy, they suffer from unexpectedly tight monetary policy, as money shifts away into safer asset classes. Furthermore, Bitcoin is now a macro asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell bitcoin, an all of crypto follows”.
Now, the biggest indicator to watch will be the Consumer Price Inflation (CPI) data to be released ahead of this week on Wednesday. Until then, the Bitcoin price will likely remain choppy around $42K levels.
If CPI turns to the downside, it means the Fed will be less aggressive in QT measures. Thus, expect the BTC price to pop in that case. If CPI comes higher than expected, the BTC price will slide further into the 30s.