Bitcoin Stagnates at $52,000 Amidst U.S. Inflation Concerns

Bitcoin Fails to Gain Ground as U.S. PPI Data Reveals Continued Inflation, Struggling to Stay Above $52,000.

Bitcoin remains steady at $52K despite US PPI miss and declining odds of Fed rate cut.

BTC/USD 1-hour chart. Source: TradingView

PPI offers no relief for Bitcoin, risk assets Data from Blocking.net Markets Pro and TradingView showed stagnant BTC price action into the week’s last TradFi trading session. Following hot on the heels of the Consumer Price Index (CPI) print two days prior, the Producer Price Index (PPI) numbers for January added to the U.S. inflation headache. Year-on-year, PPI came in at 0.9% – fractionally lower than a month prior but still 0.3% above market forecasts. Together with “hot” CPI, the result thus made markets even more timid about when the Federal Reserve could ease fiscal policy this year. Per data from CME Group’s FedWatch Tool, the odds of the Fed cutting interest rates at its March meeting were at 8.5% at the time of writing – less than half the 17.5% chances at the start of the week.

Fed target rate probabilities. Source: CME Group

“A March interest rate cut is likely completely ruled out after this data,” trading resource The Kobeissi Letter wrote in part of a response on X (formerly Twitter), reinforcing its reaction to CPI. > “Furthermore, a May rate cut has become questionable as well.”

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$BTC 4H
Choppy price action here with a lot of inside bar closes basically within the same intraday balance

often there's a fakeout before the real expansive move

4H 21EMA ~ $51K

Weekly open & main 4H trend ~ $48K – $47K
(key HTF area & systematic area) pic.twitter.com/G75BeREfnE

— Skew Δ (@52kskew) February 16, 2024

Bitcoin itself hit $52,884 on Bitstamp the day prior, its highest level since late November 2021, but bulls faced pressure from sellers. Analyzing four-hour timeframes, popular trader Skew noted the significance of the 21-period exponential moving average (EMA), currently at around $51,000. > “Choppy price action here with a lot of inside bar closes basically within the same intraday balance,” he wrote. > “Often there’s a fakeout before the real expansive move.”

Analyst eyes BTC dip if ETF inflows “dry up” The U.S. spot-Bitcoin exchange-traded funds (ETFs) saw net inflows of nearly half a billion dollars on Feb. 15. This added to an impressive week in which the ETF products saw a “second wind” – an expansion of interest more than one month after their initial launch.

Bitcoin bears beware — BTC’s rally above $52K is much healthier than before

Despite removing much more BTC than that added to the supply per day, however, the ETFs are making some market observers nervous. In his latest analysis, Venturefounder, a contributor at on-chain analytics platform CryptoQuant, suggested that a slowdown in ETF interest could leave Bitcoin susceptible to a major retracement. > “Bitcoin ETF net inflow flatline/normalize is where the next 20-30% correction will start,” part of X commentary read alongside a summary of flows so far.

A previous post outlined potential BTC price floor levels, these extending all the way down to $34,000.

Q&A

Q: How does the Producer Price Index (PPI) affect Bitcoin? The PPI measures the average change over time in the prices received by domestic producers for their output. It is an important indicator of inflationary pressure in the economy. When PPI numbers come in higher than expected, like it did in January, it raises concerns about rising inflation. This can impact Bitcoin and other risk assets as investors become more cautious about the future direction of fiscal policy. If inflation continues to rise, it could potentially lead to higher interest rates and tighter monetary policy, which can have a negative effect on the price of Bitcoin.

Q: What is the significance of the 21-period exponential moving average (EMA) in Bitcoin’s price analysis? The 21-period exponential moving average (EMA) is a commonly used technical indicator in Bitcoin’s price analysis. It is considered a key level of support or resistance that can help determine the short-term trend of the market. In the case of Bitcoin hitting $51,000, if the price remains above the 21-period EMA, it can indicate a bullish sentiment and potential for further upward movement. However, if the price drops below the 21-period EMA, it may signal a reversal and a potential bearish trend.

Future Outlook and Investment Recommendations

Based on the latest data and trends, it is clear that inflation concerns and monetary policy decisions will continue to heavily influence the price of Bitcoin and other cryptocurrencies. The Federal Reserve’s stance on interest rates and fiscal policy will be closely watched by investors. Any indication of a potential rate cut or further easing of policy could provide a boost to Bitcoin’s price.

However, it is also important to consider the potential impact of ETF inflows on the market. While the recent inflows have been positive for Bitcoin’s price, a slowdown or normalization of ETF interest could lead to a significant correction. Investors should closely monitor ETF flows and be prepared for potential market volatility.

In terms of investment recommendations, it is always crucial to conduct thorough research and analysis before making any investment decisions. Diversification is key, and investors should consider a balanced portfolio that includes a mix of cryptocurrencies and traditional assets. Staying updated with the latest news and developments in the blockchain and financial industries is also essential for making informed investment choices.

References

1. Blocking.net Markets Pro
2. TradingView
3. CME Group
4. The Kobeissi Letter’s Twitter
5. Skew’s Twitter
6. Bitcoin bears beware — BTC’s rally above $52K is much healthier than before
7. CryptoQuant

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