After failing to break through the resistance level of $61,500 for two consecutive days, the price of Bitcoin has seen a slight recovery. According to data from Bitpush, BTC reached a high of $63,269 shortly after the opening of the US stock market on Monday. At the time of writing, it is trading at $62,907, representing a 2% increase in the past 24 hours.
Market awaits inflation data
Market participants are eagerly awaiting US inflation data to help determine whether the Federal Reserve will cut interest rates in 2024. The US Producer Price Index (PPI) is expected to be announced on May 14, followed by the Consumer Price Index (CPI) on May 15.
According to CME’s FedWatch tool, market analysts predict a 72% chance of interest rates remaining unchanged at the July Federal Open Market Committee (FOMC) meeting. However, the likelihood of a rate cut later this year has increased, with a 48.6% chance of a rate cut at the September meeting. Traders predict a 91.1% chance of interest rates remaining unchanged at the June meeting.
A Reuters survey conducted from May 7 to 13 showed that nearly two-thirds of economists (70 out of 108) predicted that the Federal benchmark interest rate would be lowered for the first time in September, by a range of 5.00% to 5.25%. In the previous month’s survey, only more than half of the respondents expected a rate cut in September. Only 11 people predicted a rate cut in July, and no one expected a rate cut in June. In the April survey, 26 people predicted a rate cut, while 4 people expected a rate cut in June.
Analyst Tedtalksmacro commented on the market dynamics this week, stating, “Inflation data is the focus, and volatility is expected. However, this is the first time in a while that we may see inflation data slowing down.”
The analyst explained that reducing inflation would be “beneficial for risk assets like Bitcoin,” keeping the market “on the edge of a rally.”
Analyst Seth shared the following chart in a post, stating that the Relative Strength Index (RSI) has broken the downward trendline within the daily timeframe.
The analyst admitted that this week’s “CPI, core CPI, PPI, and Fed Chair speeches” could influence the direction of the BTC price. He said, “Jerome Powell might help us regain confidence. The US economy is not as strong as the data suggests. The Ludwig Institute’s real unemployment rate is 24.2%, while the US Labor Department reports a real unemployment rate of 3.8%.”
Bitcoin price may rebound if Coinbase premium turns negative
Since reaching its all-time high of $73,835 on March 14, Bitcoin has experienced a prolonged downtrend. According to data from CryptoQuant, the Coinbase premium index reflects the price trend of BTC, which has dropped from $0.08 to near zero during the same period.
The Coinbase premium index represents the percentage difference between the BTC/USDT currency pair on Binance and the BTC/USD currency pair on Coinbase Pro.
CryptoQuant analysts explained that the Coinbase premium index is an important “leading” indicator that can be used to predict the price trend of BTC.
Historically, whenever this index turns negative and reverses from a downtrend to an uptrend, the BTC price always rebounds, as shown in the chart.
The analyst added that while the Coinbase premium index is currently positive but “close to zero” at the time of writing, “if the historical pattern repeats, we may have a better chance of success by waiting for the trend to turn negative before investing in the rebound.”
Crypto trader Mustache expressed optimism, believing that the current trend should bring about a more sustained upward movement, similar to the previous halving cycles.
In a post on May 13, he commented, “Before BTC rises to $80,000, Weak Hands need to be washed out of the market. It has always been like this. The structure remains the same, only the price is different.”
Short-term holders may influence the trend
On the other hand, analysts from crypto investment firm Ryze Labs stated in their weekly report that the behavior of short-term Bitcoin holders (those who hold the token for less than 155 days) may significantly affect the market in the coming months.
Ryze Labs stated that in three instances, 94% of both long-term and short-term Bitcoin holders were profitable: from mid-November 2017 to mid-April 2017, from mid-February 2021 to mid-April 2021, and most recently, from late February 2024 to early April 2024.
The value of Bitcoin held by short-term investors reached a peak of $117.8 billion in 2017 and $289.9 billion in 2021. During this period, long-term holders and miners sold Bitcoin to short-term holders who held the token for less than 155 days.
However, after these peaks, the losses for short-term holders increased rapidly, leading to a reversal of the cycle where short-term sellers sold to long-term holders. The team observed that historically, this shift resulted in a significant decline in the Bitcoin price over the next four to six months.
The analysts stated, “In the recent cycle, the value of Bitcoin held by short-term holders was $218.9 billion. While most initially made a profit, they started selling actively. Approximately one month after this period, the maximum decline relative to the high point of that period was about -6%. The current cycle may be different from previous cycles due to institutional demand supported by improved macroeconomic conditions. However, if these supporting factors weaken, the Bitcoin price may experience a similar decline as in past cycles.”
FxPro trader Alex Kuptsikevich stated in a report on Monday that the characteristic of the price trend is a series of lower lows and lower highs, indicating signs of investors selling during price increases.
Kuptsikevich believes that breaking below $60,000 could trigger panic selling, but currently, there is a greater possibility of the price rising above $65,000, with the 50-day moving average in early May being a noteworthy technical level.