Bitcoin could see more pain as inflation peaks
Bitcoin trends down toward the bottom of a range created in July when the cryptocurrency scored a multi-year low of $17,600. Now, BTC appears poised for further losses on low timeframes as macro forces continue to dominate global markets.
At the time of writing, Bitcoin (BTC) is trading at $19,000 with a loss of 1% and 3% over the last 24 hours and 7 days respectively. Other cryptocurrencies are following the general sentiment of the market and many are giving back their low time frame profits except for XRP.
Bitcoin caught between global macro forces
According to trading desk QCP Capital, the migration from Proof-of-Work (PoS) to a Proof-of-Stake (PoS) consensus was completed after the Ethereum “Merge”, and the sector lost its latest bullish narrative. Now macro factors are the only thing that affects.
Thus, Bitcoin, Ethereum and other cryptocurrencies increase their correlation with traditional assets and move more and more in step with global economic forces. In that sense, the upcoming Consumer Price Index (CPI) for September could put further selling pressure on BTC’s price.
The US central bank (Fed) is trying to combat the high levels of inflation, as measured by the CPI, by raising interest rates and reducing balance sheets. This causes a negative effect on the value of almost all asset classes except the US dollar. QCP Capital wrote:
The USD continues to be a bargain, as real returns on the dollar outperform all other asset classes YTD. Raw materials and precious metals that show gloomy figures (…). Consolidation of global macro sentiment has driven correlations across assets back to extremes. BTC correlation with stocks and gold (positively correlated) at all-time highs (…).
However, their efforts have been futile as inflation is proving resilient and may continue to trend upwards. The upcoming September CPI print, to be published next Thursday, will show more clues in the current macroeconomic situation. QCP Capital said:
In that connection, all eyes are on the Fed and, by extension, on the CPI printout this Thursday, where uncertainty is still high. Sell-side economists forecast a roughly 0.4% m/m and 6.5% y/y rise in core CPI, buoyed by strong shelter inflation.
If the Fed insists on raising interest rates, Bitcoin will likely trend lower in the short term. QCP Capital sees the “robust” demand in the US job sectors as potentially negative as it contributes to inflation metrics and encourages the financial institution to maintain tight economic conditions.
Bitcoin Whales Push BTC Down, Look Out Below?
The Fed is already being pressured by US allies to halt its rate hike program, but to no avail. However, this pressure can contribute to a change in the financial institution’s attitude in the long term.
Meanwhile, as the economic situation remains at extreme levels, Bitcoin’s upside potential will continue to be limited. In short time frames, data from Material Indicators shows an increase in sell orders from investors (purple in the chart below) with ask orders between $100,000 to $1 million.
As long as this trend continues, any attempt to regain previous levels will be rejected, as has been the case in recent weeks.
#FireCharts CVD shows that historically whales (purple) with $100k-$1M market orders have had greater influence on #Bitcoin price than Mega Whales (brown) with $1M-$10M market orders. Keep that in mind when trying to swim with the pod. pic.twitter.com/eVCqM5UTWo
— Material Indicators (@MI_Algos) 11 October 2022
