The higher-than-expected US Consumer Price Index (CPI) has put pressure on the cryptocurrency market in early Wednesday trading. Bitcoin traded near the support level of $69,000 but briefly dropped to a low of $67,475 after the CPI release. BTC later recovered its lost ground and was trading at $69,861.99 at the time of writing, with a 24-hour gain of 1.03%.
In the altcoin market, there were mixed gains and losses. Memecoin (MEME) led the gains with a 15.7% increase, followed by Ethena (ENA) with a 14.4% increase. Uniswap (UNI) experienced the largest drop of 10% after the US Securities and Exchange Commission (SEC) issued a Wells notice to Uniswap Labs. Other tokens with significant drops include Theta Fuel (TFUEL) with a 9% decrease and Axelar (AXL) with an 8.5% decrease.
Data showed that the CPI increased by 0.4% in March, higher than the expected 0.3%, and rose by 3.5% year-on-year, higher than the expected 3.4%. This indicates that inflation in the US is not well controlled, which has dampened investors’ expectations of a rate cut by the Federal Reserve in the summer.
The yield on the US 10-year Treasury bond reached its highest level since November, rising nearly 20 basis points. At the same time, the US Dollar Index (DXY) surged 1% above 105, reaching its highest level since November 2023. Traders are reconsidering their bets on a rate cut by the Federal Reserve. The CME FedWatch tool currently shows a 19% expectation of a rate cut in June and a 44% possibility of a rate cut in July. Yesterday, these figures were 57% and 74%, respectively.
The US benchmark stock indices touched their lowest levels in nearly four weeks. The Dow Jones Industrial Average (DJIA) closed down 420 points or 1%, the S&P 500 Index fell 0.95%, and the Nasdaq Composite Index dropped 0.84%.
Bitcoin whales bought on the dip after the CPI release. The trading platform Material Indicators tracked an increase in buying volume on the largest exchange, Binance, suggesting that whales may be buying on the dip. The company stated in a post on Twitter that the proprietary trading indicator CVD showed whales buying the dip in BTC, pushing the price back above $69,000 and turning the daily candle green once again.
Meanwhile, trader Daan Crypto Trades pointed out that the CME gap created when Bitcoin dropped below $68,000 over the weekend has narrowed with the rise in the Consumer Price Index (CPI) and has rebounded from the gap’s closing level.
In the short term, there may be volatility. Alan Scott, a writer for RAILGUN, stated that with the halving approaching, all eyes are on Bitcoin, but a major factor could make this cycle different from the previous ones. As Bitcoin reached a new all-time high before the halving, there is increased selling pressure. Short-term holders who bought at higher prices will keep selling, changing their asset allocation and taking profits. It is also worth noting that the tax season from April 15 to May 1 tends to have a negative impact on short-term price trends as it removes liquidity from the system.
Scott warned that this could lead to volatility in Bitcoin for a considerable period after the halving. Macroeconomic events such as quantitative tightening by the Federal Reserve could cause Bitcoin to fall as more liquidity is withdrawn from the market. Although cryptocurrencies have indeed rebounded this year, there are still many factors that could put Bitcoin in trouble.
However, one potential buffer for a price drop after the halving is the decreasing supply of Bitcoin on exchanges in recent months. CryptoQuant, a cryptocurrency analytics company, reported that the demand for Bitcoin is currently “at its highest level in history (up 11% compared to the previous month),” primarily driven by large holders and whales.
With banks such as Morgan Stanley and UBS rushing to offer clients spot Bitcoin exchange-traded funds (ETFs), the demand is expected to continue to rise. Additionally, according to Tencent Finance’s “First Line” report, Jia Shi and Huaxia have obtained “coin circle” asset management qualifications in Hong Kong, and Hong Kong’s Bitcoin spot ETF is expected to be listed by the end of April.
Based on these factors, market analyst Rekt Capital believes that any price dip in Bitcoin during this period could trigger a rapid rebound.
Another voice skeptical of short-term trends is Arthur Hayes, co-founder of BitMEX. He believes that risk assets will be extremely weak before May 1, and the halving, as well as a series of “tricks” by the Federal Reserve and the Treasury Department, are the reasons he decided to “stop trading before May.” However, Hayes remains optimistic about the medium-term trend.
Author: Mary Liu of Bitpush News
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Tags:
2023 market
Arthur Hayes
BitMEX
CPI
halving
altcoins
whales
Binance
Bitcoin
bull market
Federal Reserve
market trends
inflation
Note: The opinions expressed in Bitpush articles represent the views of the authors and do not constitute investment advice.