Bitcoin (BTC) continues to outperform the expectations of most analysts as the top crypto hit a fresh two-year high of $52,115 in early trading on Wednesday, with bulls poised to extend the price gains unless bears can mount an effective defense.
The move higher follows the release of the January Consumer Price Index (CPI) report, which came in higher than the experts were expecting as inflation remains persistently sticky. The report took a toll on financial markets across the board, with stocks, cryptos, and gold all recording losses on Tuesday.
Data provided by TradingView shows that Bitcoin bounced back shortly after the CPI release, and proceeded to claw its way back to support at $50,000 before an early morning rally on Wednesday saw it increase more than 3.7% over two hours, followed by a final push that lifted it above $52,000 for the first time since Dec. 27, 2021.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $51,910, an increase of 6.2% on the 24-hour chart.
Stocks also showed signs of recovery in early trading on Wednesday, but gold remains under pressure, and trades at $1,999.50 at the time of writing, a decrease of 0.38% on the session.
The second-ranked crypto Ethereum (ETH) also charged higher in early trading, spiking to $2,775, its highest price since May 6, 2022, as speculation about the launch of a spot ETH ETF in the U.S. continues to support its price at higher levels.
ETH/USD Chart by TradingView
Addressing the reaction to the CPI report, market analyst Bloodgood said the unexpectedly high print “led to a dip in risk-on assets,” but overall, “changed nothing in the big picture, especially since we have another, much more important halving on the way, namely one in the supply of an asset that institutions can now allocate their money to more easily than ever before.”
He also highlighted that “ARK 21Shares filed an amendment for their spot Ether ETF application, which would allow them to stake a portion of the ETH held by the fund,” as a reason for the strength shown by Ether.
“It might not happen in the first batch of Ether ETFs that will be approved, but overall it’s just too appealing not to be implemented sooner or later,” he said. “When it happens, institutions will be able not just to diversify their ETF holdings into the second-largest crypto asset, but also earn some passive yield on top – a prospect that will become even more enticing when Treasury bills are no longer offering much passive income in a low-rate environment.”
Regarding Bitcoin’s breakout back above $50,000, Bloodgood noted that “The $50k level is a nice round number and it is expected that traders will take some profit there, however there’s also a technical level slightly below $52k,” a level that is acting as solid resistance at the time of writing.
“In the short to mid-term, it is important to keep your eyes on $47k if the retest happens. If the level is defended we long, if it’s broken we short the retest from below,” Bloodgood said.
For Ether, “The next major resistance lies above $3000, which is my next target if the breakout sticks,” he said.
Based on the latest Bitcoin ETF flows data, Bloodgood said “It’s easy to see what justified the optimism” that many market participants have been expressing. “Grayscale outflows are now barely a blip on the radar, while net inflows have been in the $400-550m region in the last three trading days.”
“All in all, we can safely say that the interest in ETFs is sustained and we’re likely to see more of it, which will bring even more money into the space when a spot Ether ETF is also launched,” he said.”
Bloodgood concluded by highlighting what many crypto enthusiasts have kept in the back of their minds for years while maintaining the hodl lifestyle.
“Don’t forget that the total market cap of the entire crypto market is 30% less than that of Apple, which means it doesn’t take that much institutional money flowing in to make a difference,” he said. “We’re getting a taste of that right now with Bitcoin breaking two-year highs, but once BTC is in price discovery and ETH is also trading in the form of a yield-baring spot ETF, that’s when things will really get wild.”
