By Francisco Rodrigues (All times ET unless indicated otherwise)
The U.S. inflation report, set to be released later today, may serve as a catalyst for shifting Bitcoin (BTC) out of its recent stagnation.
Understanding the January Inflation Trends
Historically, January’s inflation figures have often indicated notable price increases. For instance, last year, the inflation data marked the end of a series of declining readings, a trend that appears to be repeating itself in 2023. This pattern is attributed to businesses assessing their costs and adjusting prices at the beginning of the year, as highlighted by the Wall Street Journal.
Potential Impacts of a High Inflation Report
If the inflation data comes in higher than expected, it could imply that “monetary policy has more work to do,” as Dallas Fed President Lorie Logan stated in a recent speech. The Federal Reserve has already conveyed that it is not in a hurry to modify interest rates after implementing 100 basis points of cuts last year.
Moreover, the tariffs established during the Trump administration may come into play, with the Federal Reserve Bank of Boston suggesting they could contribute to an increase of up to 0.8% in core Personal Consumption Expenditures (PCE), the inflation gauge favored by the Fed. However, it’s noteworthy that tariffs had minimal impacts in 2018 and 2019.
A Soft Inflation Report: A Silver Lining for Bitcoin?
Conversely, a softer inflation report could benefit risk assets, including Bitcoin. A lower-than-expected figure might elevate expectations for interest rate cuts, potentially leading to a depreciation of the U.S. dollar index and a decrease in Treasury yields, as reported by CoinDesk’s Omkar Godbole.
Growing Demand for Bitcoin
Despite the uncertainty surrounding inflation, demand for Bitcoin remains robust. This week, Japanese mobile-game studio Gumi announced its intention to acquire approximately $6.6 million worth of BTC, while KULR Technology Group increased its crypto holdings to 610.3 Bitcoin.
Additionally, Goldman Sachs’ recent 13F filing revealed a significant increase in its exposure to spot Bitcoin and Ether ETFs during the fourth quarter. Strategy has also been making near-weekly Bitcoin purchases.
Market Sentiment and Caution
Bitcoin’s Coinbase premium, which reflects the price difference between BTC on U.S. exchanges and Binance, has recently turned negative, indicating a cautious sentiment among U.S. traders ahead of the inflation report.
This caution is compounded by the potential headwinds facing the crypto market, with some suggesting that it may have peaked in its current cycle. Research firm BCA Research has issued notes to clients indicating that record ETF inflows and the memecoin craze may serve as warning signals.
Additionally, a recent report from JPMorgan highlighted a slowdown in the growth of the crypto ecosystem, noting a 24% drop in total trading volumes. Nevertheless, activity remains above pre-U.S. election levels.
What’s on the Horizon: Key Dates to Remember
Crypto Events:
– February 13: Kraken begins gradual delisting of USDT, PYUSD, EURT, TUSD, and UST stablecoins for EEA clients, concluding on March 31.
– February 13: Launch of Story (IP) mainnet.
– February 14: Dynamic TAO (DTAO) network upgrade goes live on the Bittensor (TAO) mainnet.
– February 14, 2:30 a.m.: Qtum (QTUM) hard fork network upgrade.
– February 18, 10:00 a.m.: FTX Digital Markets begins reimbursing creditors.
– February 21: TON (The Open Network) becomes the exclusive blockchain for Telegram’s Mini App ecosystem.
Macro Events:
– February 12, 8:30 a.m.: U.S. Bureau of Labor Statistics (BLS) releases January’s Consumer Price Index (CPI) report.
– February 12, 10:00 a.m.: Fed Chair Jerome Powell presents semi-annual report to U.S. House Committee on Financial Services.
– February 13, 8:30 a.m.: BLS releases January’s Producer Price Index (PPI) report.
Token Events and Governance Discussions
Governance Votes:
– Morpho DAO is considering a 25% reduction in MORPHO rewards on Ethereum and Base.
– DYdX DAO is voting on the subDAO taking control of stDYDX within the Community Treasury.
– Curve DAO is voting on increasing 3pool’s amplification coefficient and raising admin fees.
Unlocks:
– February 12: Aethir (ATH) unlocks 10.21% of circulating supply worth $23.80 million.
– February 14: The Sandbox (SAND) unlocks 8.4% of circulating supply worth $80.2 million.
Token Launches:
– February 12: Avalon (AVL) listed on Bybit.
– February 12: Game7 (G7) listed on multiple exchanges.
Market Movements: Current Status
– Bitcoin (BTC) has seen a slight decline of 0.4% since Tuesday, currently standing at $96,029.62.
– Ethereum (ETH) is down 0.17%, priced at $2,619.27.
– The CoinDesk 20 index is up 0.66%, with a current value of 3,178.54.
Technical Analysis Insights
Bitcoin’s dominance is recorded at 61.32%, while the Ethereum-to-Bitcoin ratio stands at 0.02728. The hash rate is at a seven-day moving average of 800 EH/s, with total fees amounting to 5.25 BTC, valued at approximately $505,060.
Traders are advised to monitor the Moving Average Convergence Divergence (MACD) indicator for Dogecoin, which is currently coiling around a critical support level of 25 cents.
In Conclusion
The upcoming inflation report has the potential to significantly impact Bitcoin’s market activity. As traders and investors remain vigilant, the unfolding events in both the crypto and macroeconomic landscapes will be crucial in determining the direction of Bitcoin and other risk assets. Stay tuned for further developments!
