Bitcoin is teetering near $61,000, and data due later today could push it over the edge along with the broader crypto market.
The U.S. Consumer Price Index for May is expected to hit the wires 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, the highest in three years, after April’s reading of 3.8%, according to Reuters.
That would put inflation more than two full 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 biggest cryptocurrency even lower.
That said, bitcoin’s reaction will depend less on the headline and more on what’s underneath it.
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 print as a passing effect of the rise in oil prices in the first quarter driven by the war with Iran.
This looks plausible given that the CBOE Oil Volatility Index (OVX) has already cooled to pre-war levels and WTI crude fell over 16% to $87 a barrel. barrel last month. It continues to trade around these levels.
“A 0.3% MoM core inflation reading (consensus est.) could mean a small initial increase in rates if driven by transitory factors (eg fuel surcharges),” MUFG Research said. “However, if inflation expands, it will affect a market that is already on edge and trigger a minor sell-off.”
For bitcoin traders, a higher-than-expected number across multiple sectors raises the likelihood of a break below $60,000. According to CME Fed fund futures, traders are already pricing in a closing rate that is 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 as BTC looks oversold on key indicators such as the RSI.
Either way, volatility is likely to be elevated. The direction is what the CPIs have to decide. Pay attention!
Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead.”
What is trending
Today’s signal
The chart shows XRP’s weekly price action in candlestick format since the end of 2023.
Prices for the payments-focused cryptocurrency have dipped below their 200-week simple moving average (SMA) in 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 signals the potential for a deeper slide towards the next support at $0.95, the high hit three years ago. This is the level at which sellers overpowered buyers in July 2023, reversing the reversal at that time.
