Bitcoin price, after crashing from nearly $24,000 to around $21,800 last week, has fluctuated in a narrow range. This situation may change when new consumer inflation figures are released in the US.
The recent slide coincided with a sharp rebound in the U. S. Dollar Index (DXY), which has risen about 3% from its year-to-date low. Similarly, the VIX index has risen by over 25%.
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U.S. Dollar Recovering
The spectacular Bitcoin rally came to an end for the time being in the middle of last week. At the moment, Bitcoin and most other cryptocurrencies’ prices are moving sideways as investors wait for the month’s key economic data, which will be released in the US late Tuesday night.
There were several major events in the past two weeks. First, the Fed decided to raise interest rates by 0.25%. Fed officials expressed some optimism about the economy after the smallest rate hike in months.
Secondly, good labor market figures were published in the United States. They showed that the U.S. economy added over 500,000 jobs in January, while the unemployment rate fell to 3.4%. Wage growth continued to accelerate this month.
In a statement last week, Jerome Powell warned that such a situation in the labor market would make it difficult to lower inflation. Therefore, the next main catalyst for the bitcoin price will be the information about how inflation in the United States changed last month.
These figures will have a strong impact on the crypto market, as they can provide more insights into what the Fed will do next. Economists expect inflation to have increased slightly in January, especially in the costs of services.
If these expectations hold true, we could see a Fed take a more aggressive tone soon. The bank could raise rates above 7% later this year. However, if inflation falls short of expectations, the Fed could start easing in the coming months.
Therefore, the prices of Bitcoin, Ethereum, Ripple, Cardano, and other coins could fall or rise depending on what exactly the inflation numbers show.
Bitcoin Price Forecast
On the chart, it can be seen that the BTC price has fallen recently. This price slide occurred after the coin fell below the Fibonacci retracement level of 23.6%. In addition, BTC formed a small shooting star formation.
It has also retested the important support at $21,586, the high from November 5th. It is therefore possible that the BTC price will fall further in the run-up to the publication of new inflation data. If that happens, a slide to around $20,000 cannot be ruled out. Bitcoin could then recover after the report, as investors will take advantage of their buying opportunity.
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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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