Bitcoin Price Claims Back $28,000 As Core PCE Turns Cooler Than Expected
close up of bitcoin with bear figure shot in las vegas, nv. usa 6 September 2021
Today, March 31, is of utmost importance to the Bitcoin price for three reasons: the quarterly settlement day for Bitcoin options, the release of the US Personal Consumption Expenditure (PCE) price index, and the monthly closing candle for BTC, which could herald a breakout from the bear cycle.
The former has already happened. At 8:00 UTC (4:00 am EST), Deribit, the world’s largest crypto options exchange by trading volume and open interest, settled over $4 billion worth of Bitcoin options. Bitcoin price fell below $28,000 on this occasion, recording a low of $27,512.
Pseudonymous analyst @52kskew stated that Deribit-driven selling occurred. However, decent supply support has been seen on Bitstamp and several other exchanges. The analyst shared the chart below and added:
Deribit CVD & Delta shows the price impact of option expiry. Usually occurs when large open options are nearing expiration and books need to be balanced out (delta-neutral or hedged).
Bitcoin price breaks above $28,000 on core PCE data
As Bitcoinist reported earlier this week, PCE was released today at 8:30am EST the most important macro data point of the week. PCE is the Federal Reserve’s preferred measure of inflation. This second major event is now also on the books.
In an initial reaction, the Bitcoin and crypto markets reacted positively to the new inflation data. The US Bureau of Economic Analysis (BEA) announced that the annual rate of the core PCE price index was 4.6% in February, while the expectation as well as the previous reading was 4.7%.
This, Core PCE services excluding housing had the smallest increase in February since last July. The core PCE rate on a monthly basis was reported at 0.3%, with the forecast at 0.4% and last reported as high as 0.6%.
Additionally, US personal spending in February (MoM) was also reported at 0.2% (est. 0.3%, previously 2.0%). Additionally, the US PCE price index for February (YoY) came in at 5.0% (est 5.1%, previous report 5.3%).
US core PCE price index (MoM): 0.3%, [Est. 0.4%, Prev. 0.5%]
US Core PCE Price Index (YYYY): 4.6%, [Est. 4.7%, Prev. 4.7%]
US personal consumption (MoM): 0.2%, [Est. 0.3%, Prev. 2.0%]
US February PCE price index (YoY): 5.0%, [Est. 5.1%, Prev. 5.3%]— CN Wire (@Sino_Market) 31 March 2023
In principle, any decline in inflation is a positive sign and suggests that the aggressive tightening of monetary policy by the Federal Reserve over the past year is having at least a mild effect. Because of this, the Bitcoin price is also currently reacting bullishly to the news.
However, the reaction is muted. While inflation is slowing, which is good for financial markets, the economy is also slowing as shown by personal spending, which is bad and is fueling fears of a recession.
Furthermore, the decline in inflation cannot be considered good enough. 5% PCE and 4.6% core inflation are still far from stable 2%. Nick Timiraos of the Wall Street Journal wrote via Twitter that core PCE inflation in February was +4.6% over the past 12 months, +4.9% over the past 3 months, and +4.5% over the past 6 months, annually – which shows the slow progress.
Core PCE inflation in February
+4.6% in the last 12 months
+4.9% in the last 3 months, annually
+4.5% in the last 6 months, annually pic.twitter.com/YdokzmQI0B— Nick Timiraos (@NickTimiraos) 31 March 2023
BTC Price Target Key Monthly Close
Bitcoin traders should also pay attention to the monthly candlestick on the Bitcoin chart. As Rekt Capital notes, BTC could break its multi-year downtrend and re-enter bullish territory.
#BTC is just two days away from confirming a macro downtrend breakout
Historically, this has been a trend-defining outbreak
Right now we are witnessing history in progress$BTC #Crypto #Bitcoin pic.twitter.com/a8OXaS2jrk
— Rekt Capital (@rektcapital) 30 March 2023
At press time, the Bitcoin price was trading at $28,172, attempting to break above the $28,150 resistance.
Featured image iStock, chart from TradingView.com
