In a surprising turn, the latest Consumer Price Index (CPI) report revealed unexpectedly low U.S. inflation figures. Core inflation fell by 0.1 percentage points, from 3.4% to 3.3% in June, marking its first decline in nearly four years. Analysts have interpreted this as a bullish sign for Bitcoin. However, despite these promising figures, Bitcoin’s price has yet to show significant gains.
With a potential interest rate cut from the Federal Reserve, which could deter investments in fixed-income assets, investors might seek higher returns elsewhere.
Markus Thielen, an analyst at 10x Research, predicted a Bitcoin rally leading up to the U.S. inflation announcement, expecting a decline in inflation. Although Bitcoin surged briefly post-CPI announcement, it quickly sold off, even with the high probability of a September rate cut.
Let’s analyze, shall we?
Decoding the Bullish Theory
The latest report highlights a crucial aspect of financial markets: success often involves going against the consensus and being correct. The post-CPI rally was short-lived, as the market had already anticipated lower inflation. Identifying market upturns is essential—one scenario can lead to substantial gains, while another can result in significant losses.
What’s Next for Bitcoin?
Following the recent inflation data, the likelihood of a September rate cut has risen to 87%, and the chance of two or more Federal Reserve rate cuts by November has exceeded 50%. Coupled with a nearly 1% drop in the U.S. dollar index, these factors suggest that Bitcoin might experience another rise.
Investment Opportunities to Know
Analysts believe that now is an opportune moment to invest in Bitcoin, given the supportive factors. While selling pressure from the German government is easing, Bitcoin appears technically oversold. The anticipated liquidity support from ETFs buying the dip and potential Fed rate cuts adds to the positive sentiment.
However, potential selling pressure from Grayscale and upcoming payouts from Mt. Gox by July 24 could impact the market.
The potential $16 billion in FTX creditor payouts, with $3.2 to $5 billion possibly reinvested into crypto assets, adds further complexity to the market. Despite these challenges, the combination of easing selling pressure, ETF activity, and expected Fed rate cuts could drive Bitcoin’s price upward in anticipation of the rate cut.
Bitcoin Price Struggles
In the midst of a bullish market, Bitcoin appears to be struggling. With the Relative Strength Index (RSI) at 48.30 and priced at $57,412, Bitcoin recently faced resistance at $59,500 and fell by 3.87%. It has now entered a triangle formation, signaling bear market control. Concerns over a $1.1 trillion market cap drop are affecting sentiment. Large BTC holders are buying more, while retail investors are selling.
After the German government’s BTC sales and Mt. Gox repayments, the market may see a rebound in 1-2 months, potentially by Q3.
Technical indicators scream “bear,” but analysts are bullish. Who do you trust? Weigh in with your analysis!
