The traditional global asset and digital asset markets are responding to the eagerly anticipated Consumer Price Index (CPI) data. The yet-to-be-released CPI data will influence whether or not the Federal Reserve tightens monetary policy further.
Prior to the release of January’s U.S. CPI statistics, TradingView data showed that the BTC/USD pair was unable to surpass $21,800. As markets prepare for the impact of macroeconomic data, BTC continues to reject levels below $22,000.
CPI data set to affect BTC price
According to CPI data, the STOXX Europe 600 index closed 0.9% higher on Monday. On Tuesday, though, Asia-Pacific markets sent mixed signals. Japan established an optimistic tone when it announced the appointment of Kazuo Ueda as the new governor of the Bank of Japan.
On the other hand, stock futures in the United States fell as investors awaited important inflation data. A massive wave of inflation has made investors wary about future developments.
However, just a few hours before the release of CPI data, the global digital asset market went green. Over the last 24 hours, the total market capitalization has increased by 1.5%. It is now worth $1.01 trillion. During the same time period, the prices of the most important cryptos, such as Bitcoin (BTC) and Ethereum (ETH), saw a small rebound.
Experts predict that the US CPI data will fall within the range of 5.8% to 6.7%, with a median of 6.2%. It is estimated that if the inflation rate comes in at 5.8%, it will be the seventh consecutive monthly reduction. This favorable conclusion will encourage investors to invest in the markets.
Moreover, if the inflation rate comes out to be 6.7%, it will be the first time since July 2022 that it has increased.
In January, the CPI data is predicted to rise by 0.4%, according to the prediction. This surge may represent the greatest increase over the past three months. In addition, it will be bolstered by rising gas prices and enduring food inflation.
A Dow Jones poll indicates that the CPI rate will increase by 0.4% compared to the previous month. While it is 6.2% more expensive than in January 2022.
CPI data crucial in determining crypto losses
Asian equities markets were neutral on Tuesday as investors awaited the release of the US CPI Data later in the day. The Federal Reserve of the United States is likely to raise interest rates by another 25 basis points at its meeting next month.
Trading firm QCP Capital raised concerns about factors other than data in its most recent market update. It cautioned that the current legal proceedings against Blockchain startup Paxos, which issues the Binance stablecoin, could be the tip of the iceberg in terms of US regulatory policy.
As the regulatory hammer is still out against the industry (possibly until the 2024 election), the upside on crypto’s market cap looks even more subdued from that perspective now. Hence, today’s CPI print is crucially important to decide the extent of the downside for crypto.
QCP Capital
The Fed is not expected to adjust interest rates until the third week of March, with another CPI print due before then.
Why is the crypto market down today?
Since reaching a peak of $1.06 trillion on February 2, the crypto market cap (TOTALCAP) has declined. The decline resulted in a low of $937 billion on February 13. At $941 billion, the low was made just below the 0.382 Fib retracement support line.
TOTALCAP, on the other hand, formed a long lower wick (green icon) and bounced. The 0.382 Fib retracement support level was therefore validated. The TOTALCAP is most likely in wave four of a five-wave uptrend. It is unclear whether wave four will make a lower low or consolidate before rising. In the short term, though, a relief rally is likely.
Like the crypto market value, the Bitcoin price could be in wave four of a five-wave rise. The price, however, has not touched the 0.382 Fib retracement support level.
As a result, it is probable that BTC will create a little lower low and reach it before the correction is finished. A break below $20,920 might send the Bitcoin price to the next support level at $19,890.
Market Update: BTC drops after CPI Data figures
The January CPI Data climbed 0.5% versus 0.1% a month earlier, matching economist estimates.
On a year-over-year basis, however, inflation was somewhat higher than expected, coming in at 6.4% in January vs. 6.5% in December and 6.2% predicted.
The core CPI data, which excludes food and energy costs, climbed 0.4% in January, matching predictions and remaining unchanged from December’s rate. The year-over-year core CPI in January was 5.6%, compared to the 5.5% predicted and down from 5.7% a month earlier.
Bitcoin (BTC) declined around $100 in the minutes following the announcement, trading at $21,770 at press time. Stock index futures fell somewhat as well, with the Nasdaq 100 down 0.25%.
Traders are keeping a tight eye on the rate of inflation, which is still high but has been falling for several months. While a continued slowdown may allow the US Federal Reserve to suspend its rate hike cycle, this morning’s news shows that more work needs to be done.
