(Kitco News) – Financial markets saw green in early trading on Tuesday after the latest Producer Price Index (PPI) report showed that U.S. producer prices rose 0.1% month-over-month in July, coming in below economists’ forecasts, while the year-over-year reading was 2.2%, just above the Federal Reserve’s 2% inflation target.
“The report showed wholesale inflation rose less than anticipated in July, potentially paving the way for the Federal Reserve to consider lowering interest rates,” said analysts at Secure Digital Markets. “Wall Street is coming off a volatile session that struggled to build on last week's rebound.”
Investors have now turned their attention to Wednesday’s Consumer Price Index (CPI) with hopes that it will confirm that inflation continues to decline and further boost the likelihood of an interest rate cut in September.
The CME FedWatch tool continues to show that Wall Street puts the odds of a September cut at 100%, and now the debate centers around whether there will be a 25 bps cut or a 50 bps cut. The odds of a 50 bps cut currently stand at 55% versus the 45% odds of a 25 bps cut.
Bitcoin (BTC) showed little response to the PPI report and at the time of writing trades at $59,490, a decrease of 1.4% on the 24-hour chart.
BTC/USD 4-hour chart by TradingView
“Bitcoin is currently oscillating between $58,000 and $60,000, lacking a decisive trend,” according to Secure Digital Markets. “Earlier, it seemed like bouncing off $58,000 – a key 61.8% Fibonacci retracement level – would be the perfect setup for accumulation before pushing higher. Now, it appears we’re stuck in a range, waiting for a catalyst to ignite some movement.”
“Altcoins are showing mixed performance, with some poised to outshine while others lag behind,” they added. “Meanwhile, the Nasdaq is showing bullish momentum, potentially fueling a new Bitcoin rally.”
One positive sign suggesting that a rally is on the table is the exchange stablecoins ratio, “which compares the amount of Bitcoin on centralized exchange wallets to stablecoins,” Secure Digital Markets said. The metric “has hit its lowest point since February 2023. This indicates reduced selling pressure on Bitcoin, as fewer traders are converting their holdings into stablecoins.”
However, according to Alex Kuptsikevich, senior market analyst at FxPro, Bitcoin and the broader crypto market are not out of the woods yet due to a notable uptick in selling behavior.
“Although cryptocurrency prices are higher on average than the previous day, there is a noticeable selling trend on the upside,” he said. “The sentiment index stands at 31 (fear), up from 25 the previous day.”
“Bitcoin does not break above $60K and faces selling after it tried to break above the 50—and 200-day MAs late last week, showing seller dominance,” he noted. “Although sentiment has moved out of extreme fear territory, the RSI index on the daily timeframe has moved out of oversold territory, losing momentum for further strength. In this environment, Bitcoin is likely to fall by $5K rather than rise by the same amount.”
BTC/USD 1-day chart by TradingView
“A sharp move lower in cryptocurrencies could be a harbinger of renewed momentum pressure on equities, which are still recovering from the 5 August lows,” Kuptsikevich warned.
