Bitcoin’s (BTC) rally above $50,000 reversed course in the morning hours on Tuesday as the release of the January Consumer Price Index (CPI) print, which came in at 0.3%, exceeding expectations, led to weakness across financial markets.
As noted by The Kobeissi Letter, the January CPI print has all but erased expectations that the Federal Reserve would reduce interest rates in March.
This inflation reading was much hotter than expected all around the board.
Core CPI was expected to fall and it didn't while CPI inflation came in 20 bps above expectations.
A March rate cut is likely gone.
Follow us @KobeissiLetter for real time analysis as this develops.— The Kobeissi Letter (@KobeissiLetter) February 13, 2024
According to the CME FedWatch Tool, the market only sees an 8.5% chance of a rate cut in March, while the odds of a rate cut in May have now fallen to less than 40%.
Data provided by TradingView shows that Bitcoin’s reaction to the news was immediate, with the top crypto losing support at $50,000 and sliding to a low near $48,400 before dip buyers pushed it back above $48,600.
BTC/USD Chart by TradingView
Addressing Monday’s move higher, Adam Berker, Senior Legal Counsel at Mercuryo, told Kitco crypto that “there are multiple factors working together to influence the latest BTC price surge to $50,000 and the ongoing dynamics in general.”
“Firstly, a lot of the market sentiment can be attributed to the news around the potential of Ethereum-based ETFs receiving an approval,” he said. “In the past, we’ve seen a similar effect with Bitcoin ETFs as well. Many people were waiting for this to happen, so the market, fueled by the news around this topic, accelerated until it reached a certain point. After the approval of BTC ETFs, a new source of fuel became necessary to maintain the positive trend, and the news about the possible approval of ETH ETFs is that fuel.”
Berker also highlighted the approaching April halving for Bitcoin as an influencing factor, saying it “greatly affects the overall mood in the market and the price surge.”
“Current dynamics remind me a lot of how things looked back in 2020,” he said. “Back then, the market was just accelerating, Bitcoin’s price was on the rise, and there were a lot of debates about whether the 2020’s halving would enable the previous all-time-high to be surpassed.”
“All these factors set the general mood of the market, which is then further accelerated, as the old news spur on the new,” Berker said. “And while negative events, such as Genesis liquidating its GBTC holdings, may put pressure on this growth, so far that pressure is not very strong when compared to the inflow of funds that’s taking place. So, we can expect BTC’s positive trend to continue.”
According to CryptoQuant founder and CEO Ki Young Ju, the rate of inflows into U.S.-listed spot BTC ETFs suggests that BTC could hit a price of $112,000 during this bull market cycle.
#Bitcoin could reach $112K this year driven by ETF inflows, worst-case $55K.https://t.co/HrkV3TU8Ul pic.twitter.com/jBn6HWpt9b
— Ki Young Ju (@ki_young_ju) February 11, 2024
“Historically, $BTC market bottoms occur at an MVRV of 0.75 and tops at 3.9,” Ju said. “With current spot ETF inflow trends, the top price could reach $104k-$112k. Without hype, maintaining the current level of 2.07, the price would be $55-59k.”
At the time of writing, BTC trades at $48,560, a decrease of 2.05% on the 24-hour chart.
