(Kitco News) – Bitcoin (BTC) continued to oscillate near support at $61,000 in early trading on Friday after the latest reading of the Fed's preferred inflation gauge – the core Personal Consumption Expenditures (PCE) index – showed the pace of inflation eased in May as prices increased at their slowest pace since March 2021.
Core PCE, which strips out the cost of food and energy, rose 0.1 % in May from the prior month, in line with Wall Street's expectations and slower than the 0.3% increase seen in April. Year-over-year, the index rose 2.6%, also in line with estimates and the slowest annual gain in more than three years.
Market watchers took this as another sign that things are improving on the inflation front, increasing the likelihood of an interest rate cut by the Fed as soon as September. The CME FedWatch Tool now puts the odds of a September cut near 68%, up from 66% the day prior.
Stocks trended higher following the PCE report, with the S&P, Dow, and Nasdaq up 0.56%, 0.66%, and 0.56%, respectively, at the time of writing.
“This follows another lacklustre session on Thursday which saw the majors only manage to crawl into positive territory, although the mid-cap Russell 2000 gained a full percentage point,” said David Morrison, Senior Market Analyst at Trade Nation. “Tonight’s close will mark the end of the first half of 2024, and it’s been an impressive one overall. As things stand, the S&P 500 is up 15% on the quarter, while the NASDAQ 100 has gained 18%. The old-school Dow only managed to tack on 4%, while the Russell gained a measly 1%.”
Data provided by TradingView shows that Bitcoin’s price continues to compress in a range between $60,600 and $62,000, with neither bulls nor bears gaining the upper hand to control the price action.
BTC/USD Chart by TradingView
“This week started on a low with the continuing outflow from BTC ETF, which peaked at $175 million on Monday,” said Rachel Lin, co-founder and CEO of SynFutures. “On the same day, we also learned that Mt. Gox will return nearly 140,000 BTC worth over $9 billion, a large portion likely to be sold in the open market.”
“On Tuesday, the German government started selling its Bitcoin holdings. Post-sale, the holdings are estimated to be around $2.8 billion,” she added. “On Wednesday, the news came out that the U.S. government had moved 3,940 of its Bitcoin worth around $240 million to exchanges and likely plans to sell them soon.”
“Not only did the additional selling pressure hurt the price of BTC, but the fear of those sales caused panic among traders, causing more downward price movement on the largest crypto asset,” Lin said. “All the fear and panic turned Monday into the lowest day for Bitcoin price in nearly two months and caused BTC to break below the crucial 60,000 level briefly. The day we also witnessed over $300M in longs liquidated, taking a lot of leverage out of the market.”
She noted that interestingly, “most of the news [this week] was Bitcoin-specific,” and “did not directly impact Ethereum or other altcoins.”
“Ethereum especially received more good news on the ETF front, as the chairman of the SEC, Gary Gensler, openly declared that the Ethereum ETF process is 'going smoothly,’” Lin said. “ETHBTC is also looking ready to break above the descending trendline that has acted as resistance for over a year and a half.”
ETH/BTC Chart by TradingView
“Despite the exhausting week that tested the resolve of traders and investors, both Bitcoin and Ethereum are holding above the previous support levels,” she added. “Bitcoin regained the 60,000 level after briefly falling below it, and Ethereum did the same with the 3,350 level.”
“These levels are crucial, as any sustained fall below them could once again take the market back towards the lows of March,” Lin concluded. “However, a strong bounce from here would indicate a higher low has been established on the larger weekly time frame, offering hope for a potential market rebound.”
