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  • Bitcoin touches $23k support as stocks fall on hot PCE data

    Bitcoin touches $23k support as stocks fall on hot PCE data

    • Bitcoin and crypto prices fell as markets reacted to January PCE data.
    • The Fed’s favourite inflation measure came in hot, jolting markets lower with S&P 500 declining nearly 1.4% and Dow dropping about 400 points.
    • Crypto analyst Rekt Capital says BTC price remains in positive territory as long as bulls hold support above $23k.

    Bitcoin price continues to struggle after the rejection from the $25k resistance, but today’s dip comes as the market reacts to hotter-than-expected Personal Consumer Expenditure (PCE) data.

    As stocks got whacked on Friday, with the S&P 500 falling nearly 1.5% and the Dow Jones Industrial Average dropping 400 points, BTC price retreated under $24k to hit lows of $23,130 across major exchanges.

    Crypto, Wall Street drops on CPE data

    The CPE is the Federal Reserve’s most preferred inflation measure and sentiment has shifted on the latest data release as investor jitters fill up again. 

    The Fed uses the CPE price index to assess how sharply prices have risen within the US economy, and data shows prices spiked 0.6% in January and 5.4% year-over-year. Core CPE also came in hot, at 4.7% against the forecast 4.3% to suggest inflation remains an issue.

    “Inflation remains too high. We’re going to have to do more to get back to 2%,” said Cleveland Federal Reserve President Loretta Mester. “I see a little more impetus in the inflation measures than my colleagues. We’re going to have to bring interest rates above 5% and hold there for a time,” she added during an interview with CNBC.

    Bitcoin price outlook

    The reaction on Wall Street also cascaded into the crypto market, with BTC price declining below a key support line recently highlighted as a “confluent support zone.” The uncertainty around the Fed’s interest rates saw most stocks scorched in early trades, a scenario also replicated in crypto with Ethereum dropping below $1,600.

    For Bitcoin’s short-term price outlook, popular crypto trader and analyst Rekt Capital says bulls could remain in control if BTC holds above $23k. However, a bearish outlook would materialize if price breaks lower.

    “BTC Weekly retest of the confluent area that is the Lower High and Monthly Range High resistance is now in progress. Price needs to hold here for the retest to be successful. However, Weekly Close below this area would be a bearish sign,” the analyst noted.

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  • Why are crypto prices rising? 2023 off to hot start

    Why are crypto prices rising? 2023 off to hot start

    Key Takeaways

    • Crypto markets have jumped to the start the year off positive macro news
    • Next inflation reading is out on Thursday, which will cause further volatility
    • Fight against inflation has long way to go, with investors not out of woods yet
    • Solana has risen 65% since New Year’s Day, but fell drastically prior and problems remain

    After what was, to put it mildly, a rather disappointing year in cryptocurrency in 2022, the new year has jumped out to a positive start.

    Bitcoin, Ethereum and all their other friends got ravaged last year, but nine days into 2023 there is green on the board. Let’s look at why this is, and whether we will see more of the same, or if price action will reverse back to the 2022 pain.

    Macro provides impetus for crypto run

    The single biggest reason for the cryptocurrency jump this year is the same reason that pulled the entire space down last year: macro.

    The stock market has had a positive start to the new year. This comes off the back of inflation readings around the globe coming in lower than expected. While there is still a hell of a long way to go in the battle against this rampant cost of living crisis, the latest data has given investors hope that central banks may pivot off their policy of high interest rates sooner than previously anticipated.

    After a decade of low interest rates, the world transitioned to a new interest rate paradigm in 2022, as rates were hiked aggressively in response to the inflation crisis. This was aimed at reining in demand and ultimately spiralling prices. As a result, all risk assets peeled back, and there is nothing riskier than crypto. So, down the market went.

    Solana decouples from market

    Of course, while macro is clearly the big driver here, there still remains idiosyncratic risk and happenings in the crypto space. Look no further than last year, when three events (Luna, Celsius and FTX) caused large dropdowns and deviations from the stock market, which otherwise displayed extremely high correlation with Bitcoin.

    To start the year, we have seen Solana streak out ahead of the crowd, printing a remarkable 65% return thus far, having opened the year at $10 and now trading at $16.50.

    I wrote a piece last week diving deep on Solana, but suffice it to say the coin has big problems. Between repeated outages, has seen several big projects flee the blockchain and has also suffered as a result of its close ties with the disgraced Sam Bankman-Fired. The below chart shows that while this rebound seems large at 65%, it is still a drop in the ocean compared to the freefall it has experienced.  

    This rise over the last week may be at least partially attributed to Bonk, the latest meme coin phenomenon which I also analysed last week. We know by now not to read too much into doggy tokens, but nonetheless, the rise has at least eased some of the pain for Solana investors.

    What Bitcoin continue to rise?

    As for the future, that is anyone’s guess. The next big day is Thursday, when the latest CPI figures are revealed. If inflation in the US comes in softer than expected, you can expect markets to rally upwards on renewed hope.

    It really comes down to the same thing it has for the last year: the crypto markets will only meaningfully rebound once the Federal Reserve pivots away from its currently-hawkish interest rate policy.

    In turn, the Fed maintains that rates will continue to rise as long as inflation is elevated. With the employment market still tight and core inflation remaining stubborn (the headline rate has partially fallen due to energy prices, whereas core inflation is typically the number that lawmakers focus on), there is still a long way to go.

    Ultimately, 2023 in the crypto markets will likely be decided based on what happens with this tussle between the Fed and inflation. Until that much-fantasised-about pivot actually occurs though, it could remain a tough time for digital markets.

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