(Kitco News) – Cryptocurrencies roared back to life on Wednesday following Tuesday’s correction, while stocks traded underwater and gold experienced volatility after the latest Personal Consumption Expenditures (PCE) report showed that inflation remains sticky.
The latest reading of the Federal Reserve's preferred inflation gauge showed that while prices saw a marginal increase in October compared to the previous month, inflation remains well above the central bank’s 2% target, raising questions about whether their efforts have been effective.
“The Fed is about to face a policy quagmire, in my view,” said Tavi Costa, macro strategist at Crescat Capital. “With core PCE inflation now at 2.8%, today's data reaffirms that consumer prices are likely bottoming.”
“History suggests we might be witnessing the start of a second inflationary wave,” he warned. “What makes this situation unique is the Fed’s limited capacity to combat this second wave, as raising rates further could exacerbate the government’s already heavy debt burden.”
“I can’t stress this enough: This scenario is profoundly bearish for the US dollar, in my view,” Costa said. “Adding to this, Trump has repeatedly advocated for a weaker dollar, further compounding this bearish USD view.”
Costa’s comments were prescient as the DXY fell from its Tuesday high of 107.204 to a low of 105.855 on Wednesday, a decline of 1.25%.
The dollar’s decline did little to help stocks, however, as the major indices sank into the red after the PCE report and remained in negative territory for the remainder of the trading day. At the market close, the S&P, Dow, and Nasdaq finished down 0.42%, 0.30%, and 0.66%, respectively.
Gold, meanwhile, trended higher early in the day but fell under pressure in the afternoon as it continued to consolidate below the record high of $2,792/oz set at the end of October. At the time of writing, spot gold trades at $2,636.90 for a gain of 0.15% on the session.
Data provided by TradingView show that Bitcoin (BTC) bulls harnessed the downward momentum from Tuesday as a springboard at $90,673, rapidly reversing course and pushing Bitcoin back above $97,000 by Wednesday afternoon.
BTC/USD Chart by TradingView
At the time of writing, BTC trades at $96,664, an increase of 6.42% on the 24-hour chart.
Correction over, bull market back on track
Commenting on Bitcoin’s rapid 9% pullback since Friday, market analyst Rekt Capital noted that “Bitcoin tends to produce brief, volatile dips in its first Price Discovery Uptrend (blue circles).”
Moving forward, he observed that “BTC is slowly approaching the recently formed Lower High resistance (blue)” and noted that “A Daily Close above it would confirm that it will likely not figure as resistance for much longer.”
“If, however, BTC produces an upside wick beyond the LH,” then traders should prepare for “another rejection,” he warned.
According to technical analyst Mercury, Bitcoin is in the process of retesting resistance at the 200-day moving average on the 30-minute chart “after a successful bounce from the $92k support level.”
“Reclaiming those MAs, to me, likely means the bottom is in, and we can look for uptrend continuation across all timeframes, back into price discovery,” he said.
And market analyst Max noted that while Bitcoin and the DXY were recently rallying in tandem, it was really a bull trap setup for DXY traders, and the dollar index is expected to fall lower in the near term, which will benefit the prices of Bitcoin and altcoins.
It appears as though the final Bull Trap has been set for $DXY.
Every cycle right before $BTC goes parabolic, there is a small window of time when $DXY & $BTC rally together. Fiat bulls get all excited & then $DXY pukes hard for about a year straight. This dynamic rockets $BTC. pic.twitter.com/S81TnRcXLb— Max (@MaxBecauseBTC) November 27, 2024
Sea of green for altcoins
Altcoin season was in full swing amid Bitcoin’s bounce back, with all but six tokens in the top 200 recording gains ahead of the Thanksgiving holiday.
Daily cryptocurrency market performance. Source: Coin360
Kadena (KDA) led the field with a gain of 25.3%, followed by an increase of 23.7% for Uniswap (UNI) and a gain of 22% for PancakeSwap (CAKE). Golem (GNT) was the biggest loser, falling 4.7%, while aelf (ELF) lost 3.3%, and Mantra (OM) declined by 3.2%.
The overall cryptocurrency market cap now stands at $3.34 trillion, and Bitcoin’s dominance rate is 57.1%.
