(Kitco News) – Inflation concerns continue to weigh heavily on asset prices after Tuesday’s reading of the latest Producer Price Index (PPI) showed wholesale prices increased 0.5% month-over-month in April, higher than the 0.3% expected by the market.
This was just the latest data point showing that inflation remains well above the Fed’s target of 2%, a sign that interest rates will continue to stay higher for longer as the central bank attempts to slow the rise in the cost of living.
“Bitcoin (BTC) prices retracted by 3.5% from Monday's highs, finding solid psychological support around the $60,000 mark,” said analysts at Secure Digital Markets. “As long as the price remains above this threshold, we anticipate potential gains targeting the $65,000 level.”
BTC/USD Chart by TradingView
While inflation and concerns about interest rates are the primary focus of investors, there are other developments keeping crypto traders on their toes, including sputtering Bitcoin exchange-traded fund (ETF) flows and the return of the meme stock frenzy.
Data provided by Farside shows that Monday saw net inflows of $66 million following two days of outflows to end last week, and the ETFs combined now hold roughly $11.75 billion in assets under management.
“Market sentiment was notably influenced by a tweet from retail trader TheRoaringKitty, central to the 2021 GME short squeeze, which propelled GameStop's stock and triggered a surge in major meme tokens,” the analysts said. “Over the past 24 hours, tokens such as PEPE, FLOKI, BOME, DOGE, and POPCAT have outperformed significantly. Likewise, other meme stocks like AMC are gearing up for a strong opening, showing a 100% increase this morning.”
While meme stocks and tokens enjoyed a spike, “U.S. stock futures dipped following an unexpectedly high producer price index (PPI) for April, tempering hopes for a Federal Reserve rate cut later this year amidst weakening inflation,” Secure Digital Markets said. “The core PPI rose by 0.5%, exceeding the anticipated 0.2%.”
“Additionally, President Joe Biden is set to impose significant tariffs on Chinese imports, including a 100% tariff on electric vehicles, a 50% tariff on solar cells, and a 25% tariff on certain steel and aluminum products,” they noted.
Following the higher-than-expected PPI reading, Fed Chair Jerome Powell said the U.S. economy is performing very well and has a very strong labor market despite inflation showing no further progress in Q1. Powell added that he does not believe a rate hike will be needed in the future, and said the most likely outcome will be for rates to remain at the current level until they see meaningful progress toward their goal.
Investors are now focused on Wednesday’s release of the Consumer Price Index for April, which will shed light on the level of inflation affecting the average consumer.
Despite the mounting economic headwinds and uncertainty from investors, Bitcoin has shown resilience over the past several months by holding above support at $60,000.
“Bitcoin bulls grew accustomed to regular monthly gains during a remarkable run that kicked off last October. So, the relative stability of the last 30 days is causing consternation in some corners, with Bitcoin’s price not far off where it was a month ago,” said Neil Roarty, analyst at Stocklytics.
“It’s no major surprise that the cryptocurrency is consolidating following a volatile start to 2024, where the launch of ETFs and the once-every-four-years halving event drove speculation and price movements,” he added. “But now the question on everyone’s lips is: ‘what will break Bitcoin’s current holding pattern?’”
“Many are looking in the direction of the US Federal Reserve,” Roarty suggested. “A surprise in Wednesday's CPI data may prompt earlier interest rate cuts than Fed Chair Jerome Powell suggests. If not, investors may need to settle in for a period of relative calm — even if experience tells us that, with Bitcoin, the next market shock is rarely far away.”
According to MN Trading Founder Michaël van de Poppe, as long as Bitcoin bulls can defend $60,500, the next overhead resistance is $63,000. But if support at $60,500 is lost, BTC could decline to support between $52,000 and $55,000.
Crucial decisions approaching for #Bitcoin.
The range low at $60.5-61K is still holding up for Bitcoin, through which breaking $63K is the next barrier for a new run towards the all-time high.
If $60.5K is lost, I think we'll see $52-55K as the next support zone. pic.twitter.com/VoErZ1WVQv— Michaël van de Poppe (@CryptoMichNL) May 14, 2024
