in view of tuesday US Consumer Price Index (CPI) Data, which confirmed an expected uptick in MoM price pressures and revealed a smaller-than-expected drop in the YoY rate of inflation, Deribit’s Bitcoin Volatility Index (BTC DVol) surprised some analysts by remaining largely unchanged. The lack of movement in BTC DVOL, which stood at 48 on Wednesday versus 50 on Monday and is not much above record lows, matches the post-CPI mood. Bitcoin market.
Bitcoin, changing hands around $22,800, is up nearly $1,000, or 4.5%, from its pre-US CPI data level on Tuesday and is up nearly 4.7% for the week. This is despite Tuesday’s CPI data and US retail sales data stronger than expected The combination of pushing the US 2-year yield up nearly 10 bps and the US dollar index (DXY) up nearly 0.5% so far this week on Wednesday.
Movements in the US bond and currency markets reflect their tightening bets on the US Federal Reserve. According to CME’s Fed Watch tool, the odds of the Fed increasing interest rates by at least 75 bps (to at least the 5.25-5.50% target range) are now seen above 50%, as the 30-day Fed Funds are implied by futures. pricing data. That’s only up from an implied probability of about 6.0% at this time last month.
Bitcoin’s Surprising Resilience
Given the moves in the bond and currency markets, many analysts are spooked of bitcoin resilience. High yields usually weigh Bitcoin 1) Bitcoin is a non-yielding asset, so the so-called “opportunity cost” of holding it increases as short-term US interest rates rise and 2) the higher yield on US bonds, an asset considered risk-free. decreases the incentive to hold assets considered risky, such as BitcoinWhich many see as a new, speculative financial technique.
Meanwhile, while higher short-term yields are being driven by expectations of tighter Fed policy, this can also be interpreted as higher risks of weaker US growth/recession, as higher interest rates weigh on economic activity. Weak growth expectations can generally be considered to hurt risk-sensitive assets like stocks and crypto.
But Bitcoin Still holding onto the lion’s share of the 2023 rally. The cryptocurrency is still up about 38% this year versus 47% when it hit a high of $24,000 in early February. And, as already mentioned, the options markets are not pointing to stormy waters. In contrast, BTC DVOL has printed at or below current levels only 11 times in bitcoin’s history, suggesting that investors are positioned for an upcoming period of historical price calm.
what does this mean for btc price
If the options markets are correct, bitcoin is likely to remain range-bound in the weeks and months ahead. An analysis of key support and resistance levels suggests that bitcoin may remain stranded within the $20,000-$25,000 range. The $20,000 level is important because of its psychological significance and the presence of bitcoin’s 200-day moving average and real value just below it. Meanwhile, the $25,000 level is an important support-resistance level from 2022 onwards.
It makes sense to consider macro, on-chain and network fundamentals for bitcoin to remain rangebound in the coming months. On the one hand, arguing for January’s brutal rally continuing and reaching new all-time highs in the short term is unrealistic in the context of the Fed intending to hike interest rates at least a few more times to tame the US. keeps. price pressure.
On the other hand, various metrics continue to indicate inexorable growth of the bitcoin network – mining hash power and nOn-Zero Balance Wallet Address Both have touched all-time highs recently. Meanwhile, various on-chain indicators are also indicating that The Bear Market of 2022 Looks Like It’s Over, Just as a rally towards all-time highs seems unlikely, a breakout to the 2022 lows seems improbable.
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