{"id":7053,"date":"2023-05-11T00:04:57","date_gmt":"2023-05-11T04:04:57","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/crypto\/what-the-latest-us-inflation-numbers-mean-for-the-bitcoin-btc-price\/"},"modified":"2023-05-11T00:04:58","modified_gmt":"2023-05-11T04:04:58","slug":"what-the-latest-us-inflation-numbers-mean-for-the-bitcoin-btc-price","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=7053","title":{"rendered":"What the Latest US Inflation Numbers Mean for the Bitcoin (BTC) Price"},"content":{"rendered":"
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The latest US Consumer Price Index (CPI) inflation numbers were just released and Bitcoin (BTC), which rallied at the time to hit session highs in the $28,300s, seemed to like it.<\/p>\n

According to the latest CPI report, headline inflation fell to 4.9% YoY in April, its first sub-5.0% reading in over two years.<\/p>\n

That was a tad below the median economist forecast for a 5.0% YoY reading.<\/p>\n

MoM price pressures came in at 0.4% as expected for both the headline and core inflation readings, while the YoY core inflation reading fell slightly as expected to 5.5% from 5.6% in March.<\/p>\n

While the data demonstrated that US price pressures remain way above the Fed\u2019s 2.0% inflation target, continued progress back towards this goal in the last year since the YoY CPI rate hit 9.1% last summer is being taken as good news by the market, likely explaining Bitcoin\u2019s modest intra-day post-data pump.<\/p>\n

Bitcoin has since seen a sharp reversal lower, dropping from above $28,000 to under $27,000 in a matter of minutes, perhaps as a result of US government movements of some of its Bitcoin holdings that were confiscated from Silk Road.<\/p>\n

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If the US government begins selling its BTC on masse, this could create significant, albeit short-term downside pressure on the Bitcoin price.<\/p>\n

The latest Bitcoin price drop may well be algorithms trying to front-run a US government Bitcoin sale.<\/p>\n

No More Fed Rate Hikes \u00a0<\/strong><\/h2>\n

Investors interpreted Wednesday\u2019s CPI data as lowering the likelihood that the Fed lifts interest rates by a further 25 bps at its June policy meeting.<\/p>\n

According to the CME\u2019s Fed Watch Tool, the implied odds that the Fed holds interest rates for the first time in eleven meetings next month is around 95%, up from under 80% prior to the data\u2019s release.<\/p>\n

Markets also upped their bets on how many rate cuts the Fed will have embarked upon by the time December 2023 comes around.<\/p>\n

As per the CME\u2019s Fed Watch Tool, implied odds that the Fed will cut rates at least 75 bps from current levels (i.e. from 5.0-5.25% to 4.25-4.5% or below) by December are currently close to 75%, up from around 55% prior to the latest CPI report.<\/p>\n

Many economists expect that the delayed impact of the Fed\u2019s aggressive rate hiking cycle of 2022\/early 2023, combined with the new headwind of a contraction in lending as a regional bank crisis bubbles, will have sent the US economy into recession in the second half of this year, and that the Fed will have to respond with rate cuts.<\/p>\n

What Next for Bitcoin (BTC)?<\/strong><\/h2>\n

The latest US data keeps alive the dominant macro narrative that easier monetary policy conditions are coming.<\/p>\n

While Bitcoin, which appears to have lost short-term positive technical momentum, may well remain choppy in the coming days and weeks as concerns about a BRC-20 fuelled transaction fee spike keep investors hesitant, the cryptocurrency’s longer-term bull market thesis should remain intact.<\/p>\n

Easier monetary policy conditions tend to benefit Bitcoin, which has had a strong positive correlation to US liquidity conditions in recent history.<\/p>\n

BTC\/USD appears to have formed a pennant structure since its mid-March pump that could break either to the upside or downside in the near future.<\/p>\n

And with the cryptocurrency having recently lost its grip on both its 21 and 50-Day Moving Averages, some technicians have been predicting a near-term retest of key support in the $25,000s.<\/p>\n

But even if Bitcoin did test these levels, the 2023 uptrend wouldn\u2019t yet be under threat.<\/p>\n

Indeed, many think that Bitcoin is in the early stages of a new bull market cycle, with various on-chain indicators and longer-term market cycle signals suggesting as much.<\/p>\n

Meanwhile, as long as the US bank crisis continues to bubble under the surface, that should underpin demand for \u201chard money\u201d alternatives to fiat, like Bitcoin and gold.<\/p>\n<\/p><\/div>\n