Bets are in for how BTC price action will react to the latest CPI print, with data favoring inflation dissipating in the coming months.
Bitcoin (BTC) tracked $27,500 on May 10 as markets geared up for what should be a positive United States inflation print.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
CPI set for months of decline
Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it lingered in a narrow trading range ahead of the April Consumer Price Index (CPI) release.
A classic volatility catalyst for risk assets, CPI forms one of the key metrics which the Federal Reserve considers when changing interest rates.
The next change is a full month away, but both government and private-sector metrics predict declining inflation to persist, and even accelerate, in the coming months.
“A little bit of stagnation now, but into the coming two to three months, we’re likely to see a gradual decline, and actually a pretty steep decline, in inflation,” financial commentator Tedtalksmacro said in part of YouTube analysis on May 9.
Tedtalksmacro referenced both the Cleveland Fed inflation forecast and, separately, “Trueflation,” an unofficial leading indicator for inflation trends which likewise showed further substantial declines to come.
In a subsequent tweet on the day, Tedtalksmacro separately showed potential BTC price changes relative to various possible CPI numbers, along with the probabilities as per JPMorgan Chase.
CPI gameplan for #Bitcoin
Above 5.5% –> $25,000 (4% probability)
5.3% to 5.5%–> $26,500 (25% probability)
5.0% to 5.2% –> $28,500 (50% probability)
4.7% to 4.9% –> $29,000 (20% probability)
4.5% or lower –> $30,000+ (1% probability)
*Probabilities according to JPMorgan
— tedtalksmacro (@tedtalksmacro) May 10, 2023
According to CME Group’s FedWatch Tool, meanwhile, market expectations for the Fed to pause its interest rate hikes to tame inflation in June stood at 80% at the time of writing.
Fed target rate probabilities chart. Source: CME Group
Binance traders up spot selling
Turning to short-term BTC price action, the lasting impact of the Binance “FUD” episode earlier in the week meant that Bitcoin bulls remained unable to reclaim levels closer to $30,000.
Related: Binance ‘FUD’ meets CPI — 5 things to know in Bitcoin this week
Analyzing the status quo among traders, monitoring resource Skew described the market as “overly saturated with shorts,” with market makers still selling into small price upticks.
“Binance spot is the market selling aggressor today,” part of Twitter commentary stated.
BTC/USD order book data. Source: Skew/ Twitter
Overnight, fellow monitoring resource Material Indicators noted bid liquidity increasing just below the $26,000 mark on the Binance BTC/USD order book.
“Expecting to see liquidity moving around the order book between now and the morning economic reports,” part of comments on an accompanying chart read.
“The question is, will some of what’s there now get cleared out and make way for volatility or will local support and resistance get insulated with buy and sell walls?”BTC/USD order book data (Binance). Source: Material Indicators/ Twitter
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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