- Bitcoin traders will watch Wednesday's CPI data for hints that the Fed will cut interest rates.
- Risk assets like Bitcoin benefit from low interest rates.
- However, analysts warn that the data may threaten the cryptocurrency’s rally.
Traders are bracing for consumer price data for April.
While the consumer price index — or CPI — is expected to have improved from March, the world’s biggest cryptocurrency’s price risks dropping as low as 13% to $53,000 if there are any shocks, digital asset trading firm Zerocap wrote in a Monday report.
“Higher than expected CPI should cause a media flurry and lead to short-term declines in risk assets, given the concerns around stagflation at the moment,” Zerocap wrote.
Conversely, promising signs that inflation is beginning to cool could drive Bitcoin back to $65,000, Zerocap said.
Crypto watchers are expected to watch the CPI data carefully for any sign that inflation remains sticky or is easing.
Falling inflation will motivate the Federal Reserve to cut interest rates, which would be a boon to riskier assets like Bitcoin as it would lower the cost of borrowing, and thereby investing.
Elevated inflation expectations are a concern for markets, Neil Wilson, head analyst at Markets.com said in a note.
Market watchers expect to “get a feel for things” on Tuesday when Federal Reserve Chair Jerome Powell delivers prepared remarks and the producer price index is published, Wilson said.
After softer-than-expected US payrolls and wages last month, markets are expecting a September rate cut, investment giant BlackRock wrote in a market report on Monday.
But things are looking up for the US economy in the long run, David Brickell, head of international distribution at FRNT Financial, and Chris Mill, former forex trader, wrote in the “Connecting the Dots” newsletter.
It “remains a case of when, not if, we make new highs for Bitcoin given the unfolding macro dynamic.”
Sebastian Sinclair is a markets correspondent for DL News. Eric Johansson is DL News’ News Editor. Have a tip? Contact them at sebastian@dlnews.com or eric@dlnews.com.
