(Kitco News) – Bitcoin (BTC) struggled to generate momentum above $61,000 in early trading on Thursday as several headwinds – including an uptick in inflation and the impending sale of thousands of Silk Road BTCs – weighed heavily on the crypto market.
The September Consumer Price Index (CPI) report showed that inflation came in stronger than economists forecast, rising 0.2% versus expectations for 0.1%. The measure was also higher than anticipated year-over-year, coming in at 2.4% against expectations for 2.3%.
It was a similar story for core CPI, which excludes more volatile food and energy costs. It climbed 0.3% in September versus forecasts for 0.2%, while year-over-year, core CPI was higher by 3.3% versus an expected 3.2%.
While the CPI came in hotter than expected, the fact that it was only marginally above what economists had predicted means it had little effect on the rate cut expectations for November. The CME FedWatch tool now puts the odds of the Fed holding rates steady at 13%, down from 19% yesterday, while the odds of a 25 bps cut stand at 87%.
Data provided by TradingView shows that Bitcoin climbed to a high of $61,277 ahead of the CPI release but reversed course after the print was revealed, retesting support at $60,400.
BTC/USD Chart by TradingView
Bulls have struggled to mount a sustained rally over the past couple of days as the threat of another large tranche of sellling by the U.S. government is weighing on the market.
The U.S. Supreme Court has declined to take on a case dealing with the ownership of 69,370 Bitcoin – worth $4.38 billion – that was seized from the Silk Road dark web marketplace and is currently in the custody of the Department of Justice.
Battle Born Investments requested the review, claiming it had purchased rights to the seized Bitcoin through a bankruptcy estate. The company previously failed to convince a district court in 2022 and an appeals court in 2023 that it had acquired the BTC through a bankruptcy claim after Silk Road shut down in 2013. An appellate court judge in San Francisco dismissed the case last year, saying the firm didn’t have a valid claim to the BTC haul.
The Supreme Court's refusal to hear the case opens the door for the government to sell the Bitcoins, which could lead to extended weakness and price declines similar to what was seen in July when the government of Germany offloaded 50,000 Bitcoins on the open market.
“The U.S. government will sell 69,370 Bitcoins related to Silk Road, which could have some short-term and long-term impacts on the crypto market and Bitcoin prices,” said Ryan Lee, Chief Analyst at Bitget Research, in a note sent to Kitco Crypto.
In the short term, Lee warned to expect increased market volatility and psychological pressure on investors.
“Large-scale Bitcoin sales like this often trigger market fluctuations,” he said. “Especially if sold all at once or within a short period, market sentiment may take a hit due to the sudden increase in supply, leading to a wave of selling and a temporary drop in Bitcoin's price.”
“Some investors may worry that the influx of these Bitcoins could put downward pressure on prices, especially if sold on the open market,” he added. “Investors might adjust their positions in advance to avoid risks, potentially amplifying short-term volatility.”
But in the long term, Lee said that the market will ultimately absorb this added capacity.
“If the sale is done in phases, the market might gradually absorb this batch of Bitcoins,’ he said. “As the Bitcoin market matures, with more institutional investors and hedge funds involved, it may have the capacity to handle such sales. If the Bitcoins are auctioned efficiently, the long-term price impact could be relatively limited.”
Despite the mounting headwinds, market analyst Miles still sees the possibility for a blow-off top rally before the end of 2024.
“After many months of consolidation I'm sure most people are somewhat dejected with Bitcoin right now,” Miles wrote in an X update. “However, my view remains that we are approaching the final leg of the bull market, which should be the most volatile to the upside.”
“It has certainly taken much longer than I expected to get here but, that's how it goes,” he added. “There is potential for seeing 100k this year in my eyes given where we are with the FED cutting cycle beginning, and the positioning of equities, yields and the DXY.”
Where his opinion differs from many analysts is on the length of the bull market, with Miles predicting that “the bull market will be concluded this year in a sort of sharp finish, which I don't quite see as the majority viewpoint. The trap, as I perceive it, is the expectation of a bull that lasts well into 2025, spurred on by the ETF narratives, FED cut narratives and even a potential Trump election victory.”
“In contrast, the reality from my perspective is that the FED beginning to cut is the warning sign and chime that the bull for risk assets is approaching its end,” he said. “However, having said all that, I'm not attached to particular timelines, if we continue up into 2025 then that's fine also. A bull market is a bull market after all. Note, this is not advice, just my written perspective from the years I have been in this market.”
At the time of writing, Bitcoin trades at $60,669, a decline of 2.2% on the 24-hour chart.
