While the release of US inflation data this week could influence the Federal Reserve’s monetary policy, we will also see the Shanghai Ethereum update. Events that alone will cause market volatility, but what will be the Bitcoin price reaction?
To Report Cointelegraph’s analysis of market sentiment data suggests that there is little appetite for a sudden sell-off among mainstream Bitcoin investors. In addition, the correlation rate between the market’s largest digital currency and risky assets is also decreasing.
Publication of consumer price index data
The most important event this week will be the release of US consumer price index data for March on April 12.
The release of this data is historically associated with the increase in volatility in the risky asset market and the creation of fake failures (Fakeout) in the price trend of digital currencies.
Also, the Federal Reserve will prepare minutes from the last meeting of the Federal Open Market Committee (FOMC), based on which it will decide to continue raising interest rates.
Therefore, when it comes to the impact of interest rates on asset performance, the situation will be somewhat complicated. While traders want interest rates to come down faster than expected, the Fed’s approach remains hawkish, confirming last month that we may see further rate hikes.
As a result, while the sentiment survey shows that the market does not believe in the continuation of interest rate hikes for the long term, we see a gap between the Federal Reserve’s approach and the expectations of investors and traders.
FedWatch data shows that next month’s Federal Open Market Committee meeting is likely to end with another 0.5 percentage point increase. Of course, these forecasts change easily and the market reacts immediately to the release of macroeconomic data, including the inflation rate.
For James Choi, a stock market and macroeconomic analyst, inflation has another aspect; including the restraining effect of the US dollar on the cryptocurrency market.
The analyst warned that the release of inflation data this week would send the dollar into freefall next quarter, possibly paving the way for further declines in risk-on asset prices, including bitcoin.
Choi wrote on April 10 (April 21), republishing a chart of the US dollar index (DXY) that he shared in late 2022:
People don’t seem to know that the US dollar index will fall in the next 3 months. And the fall will begin with the release of consumer price index data this week.
Some other analysts, including Jim Bianco (Jim Bianco), head of macro analysis firm Bianco Research, believe that the release of the bank earnings report in the first quarter of 2023 can cause a market reaction.
In part of a tweet, Bianco predicted that whether or not the banking crisis ends will have a more profound impact than the CPI data release.
Bitcoin price volatility is increasing
According to the Kaiko report data, Bitcoin price volatility is divergent from the stock market, and a decrease in ladder volatility will increase Bitcoin price volatility.
Last month’s events, especially the US banking crisis, were enough to widen the gap between Bitcoin’s 30-day volatility trend and the Nasdaq to its highest level in a year.
Kaiko noted in his report that the correlation between the coin and gold is higher compared to the SND 500 index.
The company added that the inverse correlation between Bitcoin and the US dollar is also rapidly diminishing.
Although Bitcoin has a negative correlation with the US dollar, this rate has decreased from -60% at the beginning of the year to -23%, and as a result, it is now very insignificant.
Bitcoin’s weekly candle closed at the highest level in the last 10 months
Market data shows that the weekly Bitcoin candle closed on Bitstamp exchange on April 9 at a price of slightly more than $28,3000.
Bitcoin’s weekly candle closing at a 10-month high is significant in itself, as it could prevent sellers from trying to push the price lower.
Michaël van de Poppe, the founder and CEO of IT Trading Company, wrote in part of his latest analysis:
Bitcoin is still moving at the bottom of its support zone.
He further wrote:
Everyone is waiting to open long positions from the $25,000 range, but I think we’ll see that later. There is also no significant bearish divergence on longer time frames. Bitcoin will test the $28,600 level and we will most likely see a breakout of the $30,000 range.
At the close of the weekly candle, Bitcoin managed to reach a high of $28,540 before pulling back to the lower range.
Van de Pope remains bullish on Bitcoin’s near-term price performance. He noted:
Bitcoin has established support at $28,500 and continues its trend. The next resistance will be the $28,600-$29,000 area, which it will likely break through. More importantly; After this, confidence will return to the markets, and we will see more altcoin breakouts.
Rekt Capital, a popular market analyst and trader, in his assessment of market conditions in the long term, stated that Bitcoin is in a very good position to increase in price.
However, when it comes to analyzing the price action of 2023, he is very conservative, pointing to the possible formation of a twin ceiling pattern and a decline in the price of Bitcoin. By publishing the daily chart of Bitcoin price, he wrote:
It is not yet clear whether Bitcoin is forming a twin ceiling pattern or not.
Rect Capital pointed out:
Both peaks of the twin roof pattern are almost identical, although the formation of the second peak is slightly longer. If the formation of the second part takes longer than this, it can completely distort the pattern.
Ethereum Shanghai update is coming soon
As Bitcoin continues to regain market dominance, Ethereum’s Shanghai update could disrupt that trend this week.
After this update, it will be possible to withdraw and sell about $2 billion of staked Ethereum.
Analysts have classically disagreed on how much sell-side pressure this event will cause. Some argue that given such data, there will be little incentive for investors to exit the market.
“The Modern Investor” account user wrote in a tweet:
Those looking to sell immediately after the Shanghai update should note that it will take over a year for all staked Ethereum to be released and requests will be processed on a rolling basis.
This account user continued:
First, the Ethereums of those who invested in 2021 will be released. Be aware that in this situation, you are selling your Ethereum to whales.
While the price recently touched its highest level since August and is trying to break through the $2,000 range, the Ethereum/Bitcoin pair is trying to break out of its 10-month low.
“Didn’t work,” wrote trader Cheds, referring to the Ethereum/Bitcoin daily chart.
Continuation of greed in the market
Despite the crypto market sentiment being at the highest level of greed since the all-time high of Bitcoin price in November 2021 (Aban 1400), we are seeing promising signs from investors.
While Bitcoin’s trend remains uncertain, sentiment analysis firm Anchan Sentiment last weekend pointed to a continuation of a trend that is similar to investor behavior since early 2021.
In part of this analysis it is stated:
Traders seem increasingly content to hold their holdings for the long term as the number of Bitcoin investors continues to grow. We saw a similar trend from January to April 2021, when the price of Bitcoin rose above $64,000 for the first time.
During the first quarter of 2021, the amount of greed in the cryptocurrency market was much higher, with the fear and greed index at an all-time high. An event that usually warns about a price correction. From the publication of the inflation rate to the fall in the value of the dollar; 5 things you should know about Bitcoin this week