Text size
Crypto prices are likely to fluctuate in line with stocks following the release of inflation data.
Dreamstime
Bitcoin
Prices rose on Tuesday as investors awaited the release of key US inflation data, which should give traders their latest cue on Federal Reserve policy, which is by far the most dominant macro force shaping markets.
The price of Bitcoin has risen 1% in the past 24 hours to $22,400. The biggest digital asset continued to rise after a rally late last week saw it emerge from around $18,500 and return it to the $20,000 to $25,000 range where it has traded since a mid-June selloff knocked it down from $30,000.
That could all change with the release of US consumer price index inflation data at 8:30 am ET. The Federal Reserve has aggressively tightened economic conditions in 2022 as it battles the highest inflation in decades – a shift that has raised the risk of recession and battered both crypto and stocks. Bitcoin has fallen more than 50% this year following a sell-off in risk-sensitive assets, with
Dow Jones Industrial Average
and
S&P 500
down 11% and 14% respectively.
Expectations are for the CPI to have risen 8% year-on-year in August, down from 8.5% in July, with a fall of 0.1% month-on-month. Any signs that inflation has peaked or is cooling could ease pressure on the Fed – whose officials have reiterated their commitment to taming red-hot rates – ahead of the next decision on interest rates after a meeting on 20-21. September.
Adding to Bitcoin’s buoyancy was a fall in the US dollar, which has rallied higher this year and added weight to the leading digital currency. The
US Dollar Index,
which measures the dollar against a basket of six peers, fell 0.5% on Tuesday in a fifth day of declines after hitting a new 20-year high last week.
“Bitcoin is holding on to gains ahead of the inflation data,” said Craig Erlam, analyst at broker Oanda. “A positive inflation number could see bitcoin extend recent gains with the next major test to the upside falling around $25,500.”
Another analyst sees the technical picture as slightly more difficult.
“An oversold return has lifted bitcoin from long-term support in the $18,300 to $19,500 area,” said Katie Stockton, managing partner at technical research firm Fairlead Strategies. “As it stands, we assume the bounce will fail near resistance [around $23,000] given the prevailing negative long-term momentum, and we would be sellers on a reversal down in our short-term gauges.”
Beyond Bitcoin, digital assets were generally weaker, with
Ether
falling 1% to $1,725. Trading in the second largest crypto has been volatile ahead of a long-awaited fundamental upgrade known as The Merge, which is expected to be completed on Thursday.
Altcoins, or smaller cryptos, were more mixed.
Solana
got 2% but
Cardano
discard 2%. Memecoins were in the red, with both
Dogecoin
and
Shiba Inu
losing around 2%.
Write to Jack Denton at [email protected]
