Bitcoin is teetering near $61,000 and data expected later today could push it to the limit, along with the broader crypto market.
The US Consumer Price Index for May is scheduled to be released at 8:30 a.m. 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, following April’s 3.8% rise, according to Reuters.
That would put inflation more than two percentage points above the Fed’s 2% target. Concerns that the Fed is likely to raise interest rates are already weighing on bitcoin, and more evidence is likely to send the largest cryptocurrency lower even further.
That said, Bitcoin’s reaction will depend less on the headline number and more on what’s underneath it.
The key question is whether inflation has broadened across categories or remained concentrated in energy. In the latter case, markets may well reject this figure as a transitory effect of the surge in oil prices in the first quarter, caused 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 per barrel last month. It continues to trade around these levels.
“Core inflation of 0.3% month-on-month (consensus estimate) could cause a small initial rise in rates, if driven by transitory factors (e.g. fuel surcharges),” MUFG Research said. “But if inflation expands, it will impact an already tight market, triggering a slight sell-off.”
For Bitcoin traders, a higher-than-expected reading in several sectors increases the likelihood of a breakout below $60,000. According to CME federal funds futures, traders are already pricing in a year-end rate at least 25 basis points higher than the current range of 3.50% to 3.75%.
On the other hand, a downside surprise could trigger a rally, especially as BTC appears oversold on key indicators such as the RSI.
Either way, volatility will likely be high. It is up to the IPC to decide which direction to take. Stay vigilant!
Read more: For analysis of current altcoin and derivatives activity, see Crypto Markets Today. For a full list of this week’s events, check out CoinDesk’s “Crypto Week Ahead.”
What is the trend
Signal of the day
The chart shows the weekly price action of XRP in candlestick form since the end of 2023.
Prices of the payments-focused cryptocurrency have fallen below its 200-week simple moving average (SMA), a sign of a deepening bear market. This puts XRP at a disadvantage compared 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 at $0.95, the high reached three years ago. This is the level at which sellers dominated buyers in July 2023, reversing the rally at the time.
