CPI set to trigger dollar massacre – things to watch in Bitcoin this week

In the Brief:

  • Bitcoin is experiencing bullish sentiment and has broken a ten-month high weekly close.
  • CPI inflation and Producer Price Index inflation data will be released, which is vital in determining the Federal Reserve's direction.
  • The Federal Reserve wants to continue raising interest rates, but markets believe rate hikes will soon stop.
  • The fall of the U.S.
  • dollar is expected, leading to relief on risk assets.
  • Bitcoin's volatility has increased significantly, and it is now correlated with gold instead of the S&P 500.
  • The Shanghai upgrade of Ethereum is unlocking $2 billion in ETH.

3 - 5 minute read

Bitcoin starts the week with an increase in bullish sentiment as the price of BTC hits a new ten-month high weekly close. The recent stability in the market has been disrupted by late-minute volatility, and traders are getting excited about the prospects of a repeat attack on the $30,000 resistance level. However, the Consumer Price Index (CPI) print for March, set to be released on April 12, could have a significant impact on Bitcoin’s performance. The CPI release results in heightened volatility in risk assets, making the date stand out as a key point of watch for market participants.

This week, economic data releases will be critical in determining the direction the Federal Reserve will take. The March CPI inflation and Producer Price Index inflation data are set to be released on Wednesday and Thursday, respectively. The Federal Reserve will further produce the minutes of its latest Federal Open Market Committee (FOMC) meeting, where they opted to continue raising interest rates. Sentiment data indicates that there is little appetite for sudden selling among Bitcoin hodlers.

The Federal Reserve is hawkish on further rate hikes, while markets are diverging as sentiment indicates that the latter does not believe that rate hikes will continue much longer. According to CME Group’s FedWatch Tool, the next month’s FOMC meeting will likely end in a 0.25% repeat hike. However, odds are highly flexible, reacting immediately to any new macro data releases, including CPI.

The impact of the U.S. dollar

For macroeconomic and stock market analyst James Choi, there is a traditional headwind for crypto: the U.S. dollar, and this week’s release of CPI will set dollar strength on a three-month freefall. This could lead to potential further relief on risk assets as the dollar is expected to fall significantly. Bank earnings from Q1 is an additional source for potential knee-jerk market reactions, according to Jim Bianco, president of macro analysis firm, Bianco Research.

According to market data resource Kaiko, Bitcoin’s volatility has increased significantly, diverging from equities as the Nasdaq cools. The Bitcoin and Nasdaq correlation chart illustrates this change, with Bitcoin’s inverse correlation to the U.S. dollar unwinding. Bitcoin correlation with gold is now higher than that with the S&P 500. Bitcoin’s recent weekly close hit ten-month highs at just above $28,300 on Bitstamp, marking fresh ten-month highs for weekly closes as bears are continually denied a return to lower levels.

Ethereum Shanghai Upgrade Looms

As Bitcoin’s market dominance sees a return to form, Ethereum is preparing to undergo its Shanghai hard fork, which will unlock and open up for sale around $2 billion in ETH. While some analysts argue that the resulting sell-side pressure might be intense, more sober takes argue that there will be few incentives for holders to exit the market. ETH/USD recently hit its highest levels since August, attempting to snatch $2,000. Nevertheless, ETH/BTC is struggling to lift off from ten-month lows.

Bottom Line

Despite crypto market sentiment being at its most “greedy” since the BTC/USD all-time highs, there are some encouraging signals from hodlers. Research firm Santiment notes an ongoing trend, echoing hodler action from earlier this year as Bitcoin headed into unknown price territory. There is a rising rate of Bitcoin hodlers as traders seem to have become increasingly content in keeping their bags

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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