Bitcoin Price Fluctuates on Either Side of $64,000 After US Inflation Report
The Bitcoin (BTC) price experienced volatility around the $64,000 mark following the release of the latest US inflation data report. The report revealed a 0.3% month-on-month increase in the Core PCE index for March, which was in line with market expectations.
This translates to an annualized inflation rate of approximately 3.6%, well above the Federal Reserve’s target of 2%. Economists have pointed out that persistently high inflation in housing and utilities could keep monthly price pressures elevated for an extended period.
As a result, it is expected that the Fed will maintain higher interest rates for a longer duration. With strong data reports in recent weeks, such as manufacturing PMI and job numbers, it is not surprising that the DXY (dollar index) and US bond yields are at multi-month highs.
The current macroeconomic environment, where markets anticipate higher inflation and a more hesitant Fed to cut rates, poses a short-term challenge for Bitcoin. Historically, Bitcoin has performed better when US yields and the dollar are declining.
However, there are signs of a slowdown in the US economy. The flash PMI report for April indicated weakness in economic activity, and Q1 GDP numbers were disappointing. Until this weakness translates into lower inflation, the Fed is likely to exercise caution in implementing rate cuts, which will continue to pose a challenge for BTC.
Bitcoin Price Analysis and Market Outlook
Currently, the Bitcoin price is trading near the lower end of its multi-week range between $60,000 and $74,000. Despite recent macro headwinds and a slowdown in ETF flows, which amounted to $217 million on Thursday, BTC has held steady within this range.
Some observers attribute the strength in stablecoin growth as an indication of ongoing inflows into the crypto market. According to DeFi Llama, the stablecoin market cap is at its highest level since June 2022, reaching $158 billion. This represents a $34 billion increase since the end of October, and continued growth could support the Bitcoin price.
However, any decline in stablecoin growth may signal a potential decrease in the Bitcoin price. There is a risk that BTC could fall below its range lows around $60,000, potentially leading to a further drop towards support at $53,000.
Long-Term Bullish Outlook for Bitcoin
Despite short-term uncertainties, most experts remain confident in Bitcoin’s long-term prospects. The recent quadrennial halving event, which occurred last week, has historically driven the price to new all-time highs within a few quarters due to the reduction in BTC issuance.
This time, Bitcoin reached all-time highs prior to the halving, thanks to increased demand for ETFs. While this raises the risk of a post-halving correction, it does not negate the positive long-term outlook.
The long-term trend is characterized by increased adoption and investment in Bitcoin, particularly with the availability of ETFs. Additionally, macro factors, such as unsustainable borrowing by major economies and the narrative of Bitcoin as “digital gold,” promoted by figures like Larry Fink of BlackRock, will provide significant tailwinds.
Furthermore, Bitcoin will continue to benefit from its technological adoption, as more people globally recognize the utility of decentralized, censorship-resistant, borderless, and permissionless payment technology. Crypto firms are also expanding their centralized and decentralized platforms, enhancing Bitcoin’s usability and accessibility.
It is expected that Bitcoin will challenge the $100,000 mark sometime between 2024 and 2025.
Please note that cryptocurrency investments are high-risk and this article is for informational purposes only. It does not constitute investment advice, and there is a possibility of losing all capital.
