3 - 4 minute read
Bitcoin, the world’s largest cryptocurrency by market cap, rallied to its highest level in ten months on April 10, when it went up 3.37% to over $29,300 USD, after a quiet Easter weekend. This surge in value coincides with the anticipation of the April 12 consumer price index report – a crucial economic indicator that traders will harness to gain deeper insight into the Federal Reserve’s fight against sticky inflation.
A drop in inflation could set off another upward movement in Bitcoin’s value, making it the next possible catalyst for growth in the cryptocurrency’s worth. However, it is important to note that Bitcoin’s intraday gains occurred alongside a drop in U.S. equities, a rare decoupling that highlights the coin’s diminishing risk-on characteristics.
The Bureau of Labor Statistics will release the March consumer price index data on April 12, which according to market expectations, will show a slowdown in inflation from 6.0% year-over-year to 5.1%. A slowdown in headline CPI tends to increase the prospects of the Federal Reserve shifting in a more dovish direction. Conversely, persistent inflationary forces could lead traders to bet on more interest rate hikes in May.
Bitcoin’s rise above $29,000 suggests that crypto traders have been pricing in a drop in inflation, which, in turn, could lead to a potential Fed pivot. This rise in value also shows that the cryptocurrency could prepare to hit $30,000 ahead of the Fed FOMC but its chances of holding those gains will depend on the inflation data.
From a technical analysis standpoint, Bitcoin must close above its weekly resistance range of $29,500 to $32,000 to have a good chance of reaching $40,000. This range served as a support level in December 2020 to February 2021, May 2021 to July 2021, and January 2022 to March 2022 sessions.
In the event of a pullback from the mentioned range, BTC price risks a sharp decline toward its 50-week exponential moving average (50-week EMA), near $25,250, and its 200-week exponential moving average (200-week EMA), near $25,000.
It is important to note that the market sees a 70% probability of the Fed lifting rates by 25 basis points in their meeting in May, according to the CME Fed Watch Tool. That could be due to a tightening labor market that gives the Fed more ammunition to continue raising lending rates in the future.
With Bitcoin’s recent rise above $29,000, it appears that crypto traders have bet on a drop in inflation. Nonetheless, it is important to exercise caution when investing in cryptocurrencies as they remain a high-risk investment option. This article only presents facts, names, and quotes from the original article, and does not contain investment advice or recommendations. Readers must conduct their research before making any decision.