Bitcoin week ahead Ep21: Focus shifts on inflation data as BTC eyes $30K next

YEREVAN (CoinChapter.com) — Bitcoin (BTC) started the new weekly session in red, dropping by over 6% to below $32,000, its worst level since July 2021.

Story so far

The losses came as a part of a broader correction, led by the Federal Reserve’s first interest rate hike in more than a decade. In detail, the U.S. central bank raised the benchmark rates by 50 basis points to tame inflation that had climbed to its four-decade high of 8.5% y/y in March.

Fed Chairman Jerome Powell also stressed they would introduce similar 50 bps rate hikes in the future, coupled with a reduction of their $9 trillion balance sheet, starting with $47.5 billion in June and $95 billion after three months.

Fearing that the move would reduce the amount of excess U.S. dollars available in the market, traders started selling their profitable assets to move back to the greenback. The capital rotation hurt Bitcoin, U.S. stocks, and government bonds in tandem.

Related: Bitcoin (BTC) loses support and falls below $36K; where are the whales?

Meanwhile, the U.S. dollar index (DXY) surged to over 104, its best level since January 2003.

CPI data versus Bitcoin

Bitcoin’s price risks dropping to $30,000 this week as markets await fresh inflation data in the U.S.

The headline Consumer Price Index (CPI) expects to cool from 8.5% in March to 8.1% in April. While that represents a degree of disinflation, it would do little in influencing the Fed from raising rates aggressively in 2022. As a result, the anti-risk sentiment would stay, pressuring assets like Bitcoin further lower.

A flurry of Fed speeches is also on calendars this week. In detail, Loretta Mester, Raphael Bostic, and John Williams, presidents of the Cleveland, Atlanta, and New York branches, respectively, will attempt to instill confidence that the U.S. economy could withstand tighter monetary policies in the coming months.

In short, Fed is going to play down recessionary risks. That further puts Bitcoin at risk of facing another period of selloffs.

BTC to $30K? Here’s why

Bitcoin’s $30,000 price target is more psychological than fundamental.

Notably, the level has been instrumental as support since December. That could prompt bulls to wait for a retest before opening new long positions. But as far as technicals go, BTC’s price could continue its plunge below the $30,000-level.

In detail, Bitcoin has been breaking out of a ‘bear flag’ pattern, a bearish continuation setup that — upon breakdown — sends the price as low as the size of the previous downtrend. The chart below shows the pattern in play, with its downside target lurking below $25,000.

Meanwhile, the bear flag’s profit target also coincides with Bitcoin’s 200-week exponential moving average (200-week EMA; the blue wave). This wave has earlier marked the end of BTC’s bearish cycles. So, hopefully, Bitcoin’s drop to or below $25,000 would begin another long-term rebound.