Bitcoin (BTC) saw a sustained rejection below $22,000 until February 14 as the market braced for the impact of macroeconomic data.
Bitcoin vs. CPI: “Expect volatility”
Data from Cointelegraph Markets Pro and TradingView show BTC/USD failed to expand beyond $21,800 ahead of the United States Consumer Price Index (CPI) print for January.
It has been called the “most important” CPI release, the data, due at 8:30am Eastern Time, is a classic volatility catalyst for risk assets.
Crypto market participants thus expect a busy trading day, with $19,000 and $25,000 on the table as potential targets depending on the distance of the results from the estimates.
“We will probably see Bitcoin pump $24-25k if tomorrow’s CPI numbers show more disinflation in a positive direction,” Venturefounder, contributor to the on-chain analytics platform CryptoQuant, write as part of a Twitter update.
“Conversely, a negative shock will create a perfect retest for $19-20k BTC Today is very important. Expect volatility.”
Year-on-year CPI is expected at 6.2% versus 6.4% the previous month, with the month-on-month reading due to rise 0.5% from 0.1%.
“Relatively high expectations if you combine them with previous trends,” Cointelegraph contributor Michaël van de Poppe, founder and CEO of trading company Eight, argue in the day.
Van de Poppe has betting in the “last stage” of Bitcoin’s current retracement, with $20,500 a key level for bulls to hold.
CPI is “essential” in determining crypto losses
In its latest market update, meanwhile, trading firm QCP Capital flagged factors beyond data as a cause for concern for crypto investors.
Related: Bitcoin flirts with liquidity bid as BTC price nears new 3-week low
Legal proceedings brought against Blockchain company Paxos and BUSD stablecoin exchange Binance, he warned, could be the tip of the iceberg when it comes to US regulatory policy.
“Since the regulatory hammer is still against the industry (probably until the 2024 election), the increase in crypto market cap seems less likely from that perspective now,” it wrote.
“Therefore, the current CPI print is very important to decide the level of losses for crypto.”
QCP continues that there is a mismatch between expectations and reality when it comes to the Federal Reserve lowering interest rates despite notionally subsidizing inflation.
“In the rate market, we currently have a terminal 5.2% price cut followed by a 30bp cut on December 23rd, monumental steps from a 4.9% terminal and 50bp cut just 2 weeks ago,” the report highlighted.
“Risk assets clearly cannot adjust to these rate expectations, and we expect the current print to bring the whole market in line – whether it’s an outsized equity sell-off (in a higher number than expected) or a rate rally (in a. higher number lower than expected).
The Fed is not due to hold a rate change meeting until the third week of March, with another CPI print ahead.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.