The bitcoin exchange rate rose against the backdrop of a slowdown in inflation in the United States. After the publication of data from the US Department of Labor on consumer prices in the country for January, the cost of the first cryptocurrency at the moment increased by $600, from $21.6 thousand to $22.2 thousand.
On the evening of February 14, it became known that inflation in the United States had slowed to a minimum since October 2021. According to the results of January, it grew at an annualized rate by 6.4%, a month earlier this figure was 6.5%.
Interviewed RBC-Crypto experts commented on the current state of the crypto market and assessed its future prospects.
“The market needed this correction”
Exmo.me CEO Vladimir Cherpichnikov
On Tuesday, February 14 (Valentine’s Day), slightly disappointing data on inflation in the United States came out, such a “gift” was prepared for traders. CPI in the US in January slowed down to 6.4%, but came out higher than expected (6.2%). This was facilitated by an increase in the price of gasoline (10%) and oil futures. After the publication of these data, the price of bitcoin (BTC) moved sideways.
Unlike the stock market, cryptocurrencies showed a more stable movement. BTC was able to hold an important support at $21.5 thousand, after which the first cryptocurrency literally “exploded” and rose above $22 thousand, where it fixed. The movement was not as strong as everyone expected. Of course, volatility increased, but the price remained in a narrow price range of $21.5–22.5 thousand.
By and large, the price of BTC only reacts to inflation, unemployment, and the Fed’s interest rate. Cryptocurrency responds less frequently to all other economic indicators. The correlation with the major indices sometimes rises and sometimes falls. The January movement showed a high correlation between BTC and the stock market.
However, yesterday, February 14, BTC behaved much more predictably and calmly than SPX. At the moment, the first cryptocurrency is most correlated with the price of gold.
Closer to the date of the halving (coded reduction in the reward of bitcoin miners. — RBC-Crypto) the correlation with the indices will weaken. Historically, about eight months before the halving, the cryptocurrency market enters a full-fledged bullish trend.
If the news is calm, the price of BTC will be able to break through the nearest resistance at $22.5 thousand. After that, the price will recover to $23-23.5 thousand. If you look a little further, there is a possibility that BTC will reach $25 thousand. correction to continue a healthy move up. The optimal solution for medium-term or long-term traders will be the formation of a position now. And the main movement can be expected in the summer of 2023. So many variables coincide around this time: interest rate halt, US unemployment expected to rise, eight months before BTC halving, and so on.
The situation with BUSD brought nervousness to the cryptocurrency market, market participants have clearly lost the habit of such situations. The market has already won back the fall after the collapse of the FTX exchange. However, this news again forced crypto traders to assess the risks of their positions. Do not jump to conclusions and do not panic, the situation is already beginning to stabilize.
“Investors have calmed down a bit”
Financial Analyst BitRiver Vladislav Antonov
Initially, the market reacted lower to the inflation report on the background of the news rally in the dollar. Inflation has slowed down, but not as fast as many expected. Federal Reserve officials, led by Chairman Jerome Powell, continue to push for higher rates until they get the situation under control.
The BTC/USDt pair fell to $21,532, from which the price ricocheted by 3.65%, to $22,319. Although the consumer price index fell short of the forecast value of 6.2%, investors expect the Fed to raise rates by 25% at the March 22 meeting. basis points, up to 5% per annum. According to the latest CME Group data, futures on the rate take into account its increase to 5% with a probability of 87.8% against 90.8% before the release of the data. That is, investors calmed down a bit and started buying risky assets (US stocks and cryptocurrency).
Bitcoin does not correlate with US economic policy. Statistics have an impact on the stock and currency markets, and bitcoin is closely related to the S&P 500 and Nasdaq. The correlation with the S&P 500 for 90 trading days is 0.7, with the Nasdaq – 0.72. There is a negative correlation with the dollar and is minus 0.78.
The price bounced off the support of $21.3-21.5 thousand and remains above $22 thousand. The technical picture is favorable for the continuation of the rally to $25 thousand. The crypto market survived the inflationary report, and now buyers have time until March 22. Now buyers need to return to $23.3 thousand within two days. An analysis of the dynamics of bitcoin before the halvings shows that by the beginning of 2025, bitcoin can easily return to the all-time high of $69,000.
From the news for today: a report with data on industrial production (17:15 Moscow time). This is also important data when many expect a recession in the States. The BTC/USDt pair will continue to be affected by the dynamics of the S&P 500 and the dollar index. If the $21,300–21,500 zone fails, then the market will again “get colder” before the US Federal Reserve meeting.
“There are reasons for concern”
Head of Analytical Department AMarkets Artem Deev
Bitcoin has long been correlated with the dynamics of the US stock market: following the indices, the value of the asset rises or falls. Over the past week, bitcoin has fallen in price to $21 thousand, while other cryptocurrencies have lost 5-10% in price. This is a technical correction: after a continuous rise for five weeks in a row, investors take profits, which affects the value of the coins.
In addition, the uncertainty in the global economy, the expectation of a recession and the prospects for another Fed rate hike after the meeting last week became a factor in the decline of cryptocurrencies. Now the data on inflation in the US has come out – they turned out to be worse than expected (6.4% against the forecast of 6.2%). This further strengthens investors in the belief that the regulator will soon raise the rate, and not by 0.25 percentage points, but by more – by 0.5 percentage points. This will already be the reason for the next round of index declines, followed by Bitcoin, which can again fall below $20,000 per coin.
In the medium term, there are no great chances for growth for the crypto market, since there are reasons for unrest: increased regulation of crypto assets by regulators, possible problems with Binance, from which about $1 billion has been withdrawn in recent days, stagnation in the global economy and widespread tightening of monetary policy from the central banks. Most likely, the growth of crypto assets should be expected no earlier than the second half of 2023.
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