bitcoin is teetering near $61,000 and data coming out later today could push it over the edge along with the broader crypto market.
The US Consumer Price Index for May will be released at 8:30 am ET. The figure is expected to show that the cost of living in the world’s largest economy rose 4.2% year-on-year, a three-year high, after reading 3.8% in April, according to Reuters.
That would put inflation more than two full percentage points above the Federal Reserve’s 2% target. Concerns that the Fed could raise interest rates are already weighing on bitcoin, and more evidence is likely to send the largest cryptocurrency even lower.
That said, bitcoin’s reaction will depend less on the headline figure and more on what’s underneath.
The key question is whether inflation expanded across multiple categories or remained concentrated in energy. If it’s the latter, markets may well dismiss the figure as a transitory effect of the surge in oil prices in the first quarter driven by the war with Iran.
This seems plausible given that the CBOE Oil Volatility Index (OVX) has already cooled to pre-war levels and WTI crude fell more than 16% to $87 a barrel last month. It continues to trade around those levels.
“A core inflation reading of 0.3% monthly (consensus estimate) could trigger a small initial rebound in rates, if driven by transitory factors (e.g. fuel surcharges),” MUFG Research said. “But if inflation widens, it will hit an already stretched market and cause a smaller sell-off.”
For bitcoin traders, a higher-than-expected figure in several sectors increases the likelihood of a break below $60,000. According to CME Fed Funds futures, traders are already pricing in a year-end rate at least 25 basis points higher than the current range of 3.50%-3.75%.
A downside surprise, on the other hand, could trigger a relief rally, especially given that BTC appears oversold on key indicators, such as the RSI.
Either way, volatility is likely to be high. The direction is decided by the IPC. Stay alert!
Read more: For an analysis of current activity in altcoins and derivatives, see Crypto Markets Today. For a complete list of this week’s events, check out CoinDesk’s “Crypto Week Ahead.”
What is trend?
Today’s sign
The chart shows XRP’s weekly price action in candlestick format since the end of 2023.
Prices of the payments-focused cryptocurrency have fallen below its 200-week simple moving average (SMA) in a sign of a deepening bear market. This puts XRP at a disadvantage relative to bitcoin, which is still trading around its 200-week SMA.
The breakdown indicates that there is potential for a deeper decline towards the next support of $0.95, the high reached three years ago. This is the level where sellers dominated buyers in July 2023, reversing the bounce at that time.
