Bitcoin prices moved above a key price level after a week.
US inflation data shows highest year on year inflation in Dec since 1982.
NEW DELHI (CoinChapter.com) — The world’s largest cryptocurrency, Bitcoin, has broken out of a week-long lull to move above $44,000, a key price level. It seems the latest US inflation data combined with Fed meeting minutes have sent investors flocking to the cryptocurrency.
BTC price jumped 7.4% between Jan 11 low ($41,284) and Jan 12 high ($44,337). However, a looming death cross might lead to selling pressure for the prime crypto, making it difficult for bulls to consolidate near the $44,000 price level.
In detail, a death cross occurs when a short-term moving average trendline moves below the relatively longer-term MA line. For Bitcoin, the token’s 50-day MA seems poised to cross below its 200-day MA line soon. Moreover, the two trendlines have formed a resistance near the $48,600 price level.
Immediate resistance for Bitcoin, at $45,500, comes from its 26-day EMA line. However, BTC would need to conquer and consolidate above $44,000 before challenging the EMA resistance. After breaching above its immediate resistance, Bitcoin could target $47,300.
On the other hand, there is support for BTC at $42,900. If the death cross FUD takes hold, Bitcoin could fall to the next support level of around $41,700. In addition, sustained sell-off risks BTC falling to $40,850, a price level that has supported Bitcoin prices since Aug 6.
The relative strength index is currently neutral for Bitcoin, with 41.22 on the daily charts. At present, BTC has no risks of going into overbought or oversold levels, with the RSI trendline moving horizontally. Meanwhile, the trend-based momentum oscillator charted a bullish crossover for Bitcoin on Jan 13.
A bullish crossover occurs when the MACD line (12-day and 26-day EMA difference) moves above its signal line (9-day EMA of MACD). The pattern indicates that momentum for BTC has returned to bullish levels.
Bitcoin and Inflation
US consumer prices soared to their highest level on a year-on-year basis in Dec. The consumer price index (CPI) climbed 7% in 2021, the highest 12-month gain in 39 years since June 1982. The increase in CPI was led by higher prices for shelter and used vehicles, with food costs also contributing.
However, energy prices, which were a key reason behind the increase in inflation through most of 2021, fell in Dec. As a result, some Federal Reserve policymakers believe the central bank should begin shrinking its balance sheet soon after raising interest rates.
The latest inflation data reinforced expectations that the Fed would raise interest rates in Mar. However, an increase in Mar would be a far cry from the central bank’s earlier timeline, as the high inflation has proven more difficult to deal with than the Fed initially claimed.
Before the announcement, Bitcoin prices fluctuated between $41,000 to $43,000 on Wednesday. However, Bitcoin prices then touched $44,000 after the release of CPI data. The dollar’s weakening value might be a reason why investors are looking to put their funds in Bitcoin.
Patrick Harker, president of the Philadelphia branch of the Federal Reserve, said he supports more than three interest hikes this year to combat the rising inflation. Mr. Harker is the latest of several Fed officials who have pledged support for an interest hike in Mar.
I currently have three increases in for this year, and I’d be very open to starting in March. I would be open to more if that’s required.”
Other officials include Esther George of Kansas City, James Bullard of St Louis, and Cleveland’s Loretta Mester. Mr. Harket also stated that he could consider fewer rate hikes if inflation rates declined, adding that he would support a cutdown in the Central bank’s balance sheets.
Bitcoin Price Decline- Kazakhstan Internet Troubles or Fed Statement?
BTC prices dropped below $44,000 on Jan 5 after minutes from the Federal Reserve’s December FOMC meeting revealed the regulator planned to increase interest rates in 2022. As the stock markets fell, BTC prices followed suit as the largest cryptocurrency’s correlation with the broader financial market continued to rise.
Bitcoin’s 90-day correlation with the S&P 500 reached 0.395, its highest level in a year, leading to traditional investors treating Bitcoin as a risk-on asset instead of an inflation hedge. Furthermore, increased interest rates could potentially draw investors away from the crypto market and into traditional savings accounts.
Meanwhile, Kazakhstan’s power issues resulted in the government shutting off the internet, sending a significant part (around 12%) of Bitcoin’s hashrate offline. Although the news coming from Kazakhstan started Bitcoin’s decline, the hawkish nature of the Fed’s statements, the latter is likely a more probable cause behind BTC’s decline.
At the time of writing, BTC was trading at $43,775, down 0.36% on the day.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.