The cryptocurrency market is under pressure, but Bitcoin maintains support for its own value.
The U.S. Bureau of Labor Statistics (BLS) reported that the annual consumer price index inflation rate fell to 3.1% in January from 3.4% in December 2023. Despite this decline, the figure exceeded market expectations, which had expected a drop to 2.9%. In addition, the core consumer price index, excluding volatile food and energy prices, rose 3.9%, beating analysts’ forecasts. The release of US Consumer Price Index (CPI) data for January sent shockwaves through global financial markets, with significant implications for the cryptocurrency sector. Immediately after the publication of data on the consumer price index, the US dollar rose by 0.65%. This sharp rise in the dollar caused a downward trend in Bitcoin prices, which fell from a 2-year high of $50,000 to $49,200. Broader financial markets also experienced declines, with Dow e-minis, S&P500 e-minis and Nasdaq 100 e-minis falling significantly.
What are the current implications for cryptocurrency investors? CPI data highlights the sensitivity of cryptocurrency markets to macroeconomic indicators. Cryptocurrencies, viewed as riskier assets, often experience increased volatility during times of economic uncertainty or inflation concerns. In this context, Bitcoin price movements reflect investors’ reactions to changing market conditions and expectations regarding monetary policy. It’s understandable that the CPI report could influence policy decisions by the Federal Reserve, influencing investor sentiment and market dynamics. As the Fed walks a delicate balance between inflation control and economic stimulus, investors are keeping a close eye on consumer price index data for insight into the timing and scope of potential policy adjustments. Anticipation of a change in Fed policy adds to the uncertainty surrounding cryptocurrency markets.
The release of CPI data serves as a reminder of the complex interaction between macroeconomic factors and cryptocurrency prices. As global financial markets digest the effects of inflationary pressures, cryptocurrency investors remain vigilant about further developments. Bitcoin’s price movement in response to CPI data highlights the interconnected nature of traditional and digital asset markets, highlighting the need for a nuanced understanding of market dynamics. In short, the release of US Consumer Price Index data shook the cryptocurrency market, causing a sharp decline in the price of Bitcoin. With uncertainty surrounding Fed policy, cryptocurrency markets are experiencing increased volatility.
Meanwhile, Bitcoin is gaining traction on Wall Street, with BlackRock and Fidelity, two popular Bitcoin exchange-traded funds (ETFs), breaking records. Based on recent trends, spot Bitcoin ETFs are rapidly growing in popularity, indicating that institutional investors, or “whales,” are diving in head first. It is necessary to highlight the rapid growth of Bitcoin spot ETFs BlackRock (IBIT) and Fidelity (FBTC). Both amassed a staggering $3 billion in assets under management (AUM) within 30 days. This feat is historic as it is the first time that an ETF of any product has achieved such rapid growth in such a short period. This unprecedented demand for spot Bitcoin ETFs comes amid a broader trend of institutional adoption. It should also be noted that over 5,500 ETFs have been launched throughout history. However, no one has yet witnessed the level of enthusiasm that currently surrounds spot Bitcoin ETFs.
The rate at which the number of BTC spot ETF issuers continues to grow indicates a significant change in investor sentiment. In particular, Wall Street is increasingly recognizing BTC’s potential as a viable asset class. For years, top Wall Street executives, including Jamie Dimon, the head of JP Morgan, have dismissed the coin as speculative and fraudulent. However, when the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs after more than a decade of rejecting the product, there appears to have been a seismic shift in the investment landscape. So, as of February 12, Lookonchain data shows that Fidelity and Ark21 shares bought an additional 6,822 BTC worth more than $339 million. BlackRock’s IBIT remains the largest spot BTC ETF by AUM, controlling over 87,780 BTC. However, spot ETF issuers continue to accumulate, increasing their total mining volume to 682,448 BTC. Since Bitcoin spot ETFs track the spot price, the more spot ETF issuers buy, the higher the demand for the coin. Accordingly, rising demand has significantly impacted prices, as the daily chart shows.
Technically, Bitcoin price has gained momentum above the $48,800 resistance zone. BTC even climbed above the $50,000 resistance zone before the bears emerged. A new multi-week high was formed near $50,339 before the price corrected lower. There was a move below the $49,500 and $49,200 levels. The price even dropped below $49,000, but the bulls were active above the $48,250 support. The low was formed around $48,240 and the price is now moving higher. There was a move above the $48,800 zone.
It’s also worth noting that Bitcoin has cleared the 50% Fibonacci retracement level after recently declining from a swing high of $50,390 to a low of $48,240. It is currently trading above $48,850 and the 100-hour simple moving average. The hourly chart of the BTC/USD pair is also forming a key bullish trend line with support at $48,750. Nearby resistance is near the $49,880 level or the 76.4% Fibonacci retracement of the recent decline from the $50,390 swing high to $48,240 low. The next key resistance could be $50,000, above which the price could start another decent rise. The next stop for the bulls may be $50,400. A clear move above the $50,400 resistance could steer the price towards the $51,200 resistance. The next resistance could be around the $52,000 level. If Bitcoin fails to rise above the $50,000 resistance zone, another downward correction could begin. The immediate support on the downside is near the $49,200 level. The first major support is $48,800 and the trend line. If the price closes below $48,800, the price could gain bearish momentum. In the stated case, the price could drop towards the support at $47,800.
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