Bitcoin Sinking near $61,000 and data coming later today could push it over the edge with the broader crypto market.
The US Consumer Price Index for May is due to hit the wires at 8:30 am ET. The data is expected to show the cost of living in the world’s largest economy rose 4.2 percent year-on-year, the highest level in three years, after April’s 3.8 percent reading, according to Reuters.
That would push inflation more than two full percentage points above the Fed’s 2% target. Concerns about the Fed raising interest rates are already weighing on bitcoin, and further evidence is likely to send the largest cryptocurrency even lower.
That said, Bitcoin’s reaction will depend less on the headline data and more on what’s underneath.
The key question is whether inflation spread across multiple categories or remained concentrated in energy. If it’s the latter, markets may well dismiss the war with Iran as a temporary effect of the first-quarter spike in oil prices.
That seems understandable since the CBOE Oil Volatility Index (OVX) has already cooled to pre-war levels and WTI crude has fallen more than 16% to $87 a barrel in the past month. It continues to trade at these levels.
“A 0.3% MoM core inflation reading (from consensus) could signal a small initial rally in rates, if driven by temporary factors (eg, fuel surcharges),” MUFG Research said. “But if inflation spreads, it will impact a market that is already on edge and trigger modest selling.”
For Bitcoin traders, warmer-than-predicted data in several sectors raises the possibility of a break below $60,000. Traders are already pricing in year-end rates at least 25 basis points higher than the current 3.50%-3.75% range, according to CME Fed fund futures.
A negative surprise, on the other hand, could trigger a relief rally, especially given that BTC is oversold on key indicators, such as the RSI.
Either way, volatility is likely to be high. The direction has to be decided by the CPI. Be careful!
Read more: For an analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of this week’s events, see CoinDesk’s “Crypto Week Ahead.”
What’s trending?
Today’s tip
The chart shows the weekly price action of XRP since the end of 2023 in candlestick format.
Prices of the payments-focused cryptocurrency have fallen below their 200-week simple moving average (SMA), signaling a deepening bear market. This puts XRP at a disadvantage compared to Bitcoin, which is still trading around its 200-week SMA.
The breakout signals the possibility of a deeper slide toward the next support at $0.95, the highest hit three years ago. This is the level where sellers overtook buyers in July 2023, reversing the bounce at that time.