(Kitco News) – Bitcoin (BTC) bulls set their sights on reclaimg support at $62,000 in early trading on Friday after the Producer Price Index (PPI) report for September showed a mild 0.1% rise, which was in line with economist’s expectations.
This helped calm the nerves of anxious traders who were worried that another high print could further diminish the likelihood of an interest rate cut in November following yesterday’s higher-than-expected Consumer Price Index (CPI) print.
“Thursday's inflation data exceeded expectations, rekindling concerns among investors about persistent inflationary pressures. September's CPI outstripped forecasts, triggering a broad sell-off in risk assets,” noted analysts at Secure Digital Markets. “BTC initially dipped following the release, before sliding an additional 2% in the afternoon to a low of $58,900.”
“The disparity in ETH open interest, with a 2.5:1 ratio of calls sold over calls bought, indicates a cautious outlook among traders regarding ETH's short-term potential,” they added. “However, BTC is transitioning from the typically bearish months of August and September into what is traditionally a bullish October.”
“Turning to cryptocurrency ETFs, the market witnessed a divergence with Bitcoin ETFs experiencing outflows of $81.1 million, while Ethereum-based ETFs attracted $10.1 million in inflows,” the analysts highlighted. “Since their inception in July, ETH ETFs have seen net outflows totaling $556 million. A significant drawback of ETH ETFs is their lack of exposure to staking opportunities, denying investors potential yields of around 4%.”
As for the macroeconomic conditions that have helped boost the markets to end the work week, the analysts underscored reports indicating the “People's Bank of China (PBoC) may be gearing up to introduce additional economic stimulus measures, a move likely to bolster global market sentiment.”
“China’s equity rally stalled on Tuesday after a lackluster briefing that fell short of offering concrete economic stimulus measures,” noted analysts at Ryze Labs. “Markets are now eagerly awaiting Saturday’s fiscal briefing for more detailed guidance. We view this as a critical event that could either bolster or temper global liquidity prospects in the coming weeks.”
The main source of volatility for U.S. markets is interest rate expectations, as the latest economic data, which has been mixed, has complicated matters for the Fed.
“Last Friday’s Non-Farm Payrolls (NFP) report surprised markets with a robust gain of +254K, the largest increase in six months, pushing the unemployment rate down to 4.1%,” Ryze Labs analysts said. “This fueled optimism as the S&P 500 continued to hit all-time highs.”
“However, Thursday’s Consumer Price Index (CPI) report came in hotter than expected at 2.4% YoY, underscoring the persistence of inflationary pressures,” they noted. “As a result, expectations for aggressive rate cuts have moderated. Markets have now fully priced out the possibility of a 50bps rate cut at the upcoming November FOMC meeting, with the likelihood of a 25bps cut now standing at [84%].”
“Additionally, on Tuesday, the U.S. Supreme Court denied an appeal concerning the ownership of 69,370 Bitcoin seized from the Silk Road marketplace,” they added. “This ruling clears the path for the U.S. government to auction off the approximately $4.4 billion worth of BTC, potentially leading to significant supply pressure in the near term.”
“Bitcoin’s early days were dominated by endogenous factors,” said Matthew Graham, managing partner at Ryze Labs. “Now that Bitcoin has birthed an entire crypto industry it’s increasingly correlated to macro factors. Bitcoin Maxis are famously known for being armchair Austrian economists, maybe in retrospect it was inevitable that we would become an industry of self-taught macroeconomists!”
The effect of these macro factors on the price of Bitcoin has been evident in recent weeks as volatility spiked but did little to change the range that King Crypto has been trading in.
“Bitcoin began dropping from the $64k area to as low as $58.8k Thursday,” noted Alex Thorn, Head of Firmwide Research at Galaxy Digital. “It’s unclear whether the dip was caused by US government selling, although heavy selling was observed on Coinbase, where BTC was trading as much as $200 below other exchanges.”
“Regardless of whether this week’s dip was caused by US government sales, the ‘Individual X’ Silk Road BTC is the last big chunk of coins seized by the US that are likely to be sold on the open market,” he added. “Given that Bitfinex was the victim of a hack, it’s not surprising to us that the US government is indicating that the stolen property will be returned rather than sold.”
On the tailwind side of the equation, Thorn highlighted “The FTX plan’s approval [as] another positive step for the resolution of one of crypto’s most sordid episodes. Of course, many creditors are disappointed that claims were dollarized, as native crypto assets have appreciated substantially since the FTX bankruptcy filing. Nonetheless, creditors stand to receive more than 100% of the cash value of their claims, making this a notably positive outcome. Claims had at one point sold on the secondary market for as low as ~$0.10.”
At the time of writing, Bitcoin trades at $62,128, an increase of 2.67% on the 24-hour chart.
BTC/USD Chart by TradingView
Notably, the daily candle is nearly identical to the 1-day candle from last Friday, highlighting the fact that while volatility spiked, BTC has largely been running on a treadmill.
