US inflation fell more than expected in March, with the annual rate slowing for a ninth consecutive period to 5% against market forecasts of 5.2%, according to today’s data read.
Still a fair tick above the Federal Reserve’s 2% mandate, but a positive downward trend that should relieve pressure on hawkish monetary policy.
Analysts see it as a sign that the rates might have one more 25bps hike left before starting the downcycle.
This all amounts to “another positive reading for risk assets”, said Simon Harvey, head of FX Analysis at Monex Europe. Therefore, the reaction from the bitcoin spot price must have been bullish, right?
Not so fast. BTC/USDT dipped around 1.5% on the one-hour chart and is showing further downward movement at the time of writing, with the spot price hanging around US$29,900.
Bitcoin saw some selling pressure on the one-hour chart post-inflation read – Source: currency.com
Core inflation, which excludes volatile items such as food and energy, actually ticked higher and “will continue to cause concern at the Federal Reserve, even if they choose to pause their rate-hiking activities”, warned Laith Khalaf, investment analyst at AJ Bell.
Regardless of your perception of US consumer price trends, the degree of inflation read through to the price of bitcoin shouldn’t be overstated at the moment, for the simple reason that the benchmark cryptocurrency’s typical catalysts have changed of late.
Narrative has recently switched back to bitcoin’s utility as a safe-haven asset in the same way as gold; indeed price correlation between the two is noticeably closer compared to bitcoin’s correlation with the broader stock market.
Bitcoin’s short-term challenge remains to maintain the psychological 30k barrier and capitalising on it amid a whiff of market re-risking.
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