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The Bitcoin (BTC) price chopped either side of the $64,000 level on Friday in the wake of the latest US inflation data report, which showed the Core PCE index rising 0.3% MoM in March, in line with the market’s expectations.
A MoM inflation rate of 0.3% translates to an annualized inflation rate of around 3.6%. That’s well above the Fed’s 2% inflation target, pointing to still uncomfortably high inflation in the US.
Economists highlighted that stubbornly high housing and utility inflation could keep MoM price pressures elevated for some time.
Here is Powells favourite inflation gauge.
PCE Core Service Less Housing MoM up almost 0.6%
TOO much.. End of discussion pic.twitter.com/yEBlWeV1MA
— Andreas Steno Larsen (@AndreasSteno) February 24, 2023
That will likely encourage the Fed to keep interest rates higher for longer. Given the strong data reports in recent weeks (manufacturing PMI, jobs, etc.), it’s no surprise to see the DXY and US bond yields near multi-month highs.
The unfavorable macro backdrop, where markets are pricing stickier inflation and a Fed that is more reluctant to cut rates signals a near-term headwind for Bitcoin.
Bitcoin has historically performed better in an environment of falling US yields, and a falling US dollar.
There is some evidence that the US economy is slowing, however. This week’s flash PMI report showed weakness in economic activity in April. And the latest GDP numbers for Q1 were a disappointment.
Until that weakness translates into lower inflation, the Fed will likely stay cautious regarding rate cuts and will stay a headwind for BTC.
Bitcoin Price Analysis – Where Next for BTC?
The Bitcoin price is currently locked near the lower bounds of its multi-week $60,000 to $74,000 range.
BTC has held this range despite recent macro headwinds and slowing ETF flows which clocked in at $217 million on Thursday.
Rough day across the board for the Cointucky derby and the #Bitcoin ETFs yesterday. 5 ETFs saw outflows for a total of -$217 million. Franklin was only ETF with an inflow at $1.9 million. pic.twitter.com/9NF9iXi2GN
— James Seyffart (@JSeyff) April 26, 2024
Some have cited strength in stablecoin growth as indicative of the fact that inflows into the crypto market are still strong.
As per DeFi Llama, the stablecoin market cap is at its highest since June 2022, at $158 billion.
That’s a $34 billion rise since the end of October, and continued growth could keep the Bitcoin price buoyed.
Any weakness in stablecoin growth could be a harbinger of a lower Bitcoin price to come.
Bitcoin is currently at risk of slipping below its range lows around $60,000, which would open the door to a drop towards support at $53,000.
Bitcoin’s Long-term Bull Thesis Remains
In the long term, however, most people are confident that Bitcoin will enter a bull market.
Last week saw Bitcoin’s fourth quadrennial halving take place. The cut in BTC issuance rate from prior halvings has, without fail, helped propel the price to new all-time highs within a few quarters.
#BTC
When you zoom out
You won't be in doubt$BTC #BitcoinHalving #Bitcoin pic.twitter.com/GzTPReAlCH
— Rekt Capital (@rektcapital) April 24, 2024
Breaking from its prior historical pattern, Bitcoin hit all-time highs ahead of the halving this time, thanks to ETF demand.
That arguably raises the risk of a post-halving correction. But it shouldn’t damage the long-term outlook.
The long-term trend stays towards increased TradFi adoption and investment into the asset, accelerated now by the availability of ETFs.
Macro, too, will be a major long-term tailwind. Unsustainable borrowing by major economies means global currency debasement is set to continue.
Amid the growing narrative that Bitcoin is “digital gold,” as promoted by Wall Street giants like BlackRock’s Larry Fink, Bitcoin will be a big winner, along with other hard assets.
Larry Fink is the CEO of BlackRock.
BlackRock is the largest money manager in the world with $9,000,000,000,000.
He says #bitcoin is “digital gold” pic.twitter.com/lz30q6x7r5
— Documenting ₿itcoin 📄 (@DocumentingBTC) September 29, 2023
All the while, Bitcoin will continue to benefit from its technological adoption.
Globally, more and more people understand the utility of decentralized, censorship-resistant, borderless, and permissionless payment technology.
Fiat brains: "But Bitcoin has no real utility."
Me: "#Bitcoin is decentralized, secure, neutral, permissionless, energy money."
Fiat brains: "Yeah, but what does it DO?"
Me: "lol"
— Dr. Jeff Ross (@VailshireCap) April 26, 2024
Crypto firms, meanwhile, continue to build out their centralized and decentralized platforms, enhancing Bitcoin’s utility and accessibility to the masses.
Bitcoin is likely to challenge $100,000 sometime in 2024 or 2025.
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.