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After the latest US inflation data report was released, Bitcoin (BTC) fell below the $64,000 level on April 26th. The data showed that the core PCE index rose by 0.3% month-on-month in March, in line with market expectations.
The month-on-month inflation rate is 0.3%, and the annualized inflation rate is around 3.6%. This is much higher than the Federal Reserve's 2% inflation target, indicating that inflation in the United States remains uncomfortably high.
Economists emphasize that persistently high inflation in housing and utilities may keep upward pressure on prices at a high level for some time. This may encourage the Federal Reserve to maintain higher interest rates for a longer period. Given the strong data reports in recent weeks (such as the manufacturing purchasing managers' index, employment, etc.), it is not surprising that the US dollar index and US bond yields are approaching multi-month highs.
The unfavorable macro backdrop, that is, the worsening inflation priced into the market and the Fed's reluctance to cut interest rates, suggests resistance for Bitcoin in the near term. Historically, Bitcoin has performed well in environments where US yields are declining and the US dollar is depreciating.
However, there is evidence that the US economy is slowing down. This week's PMI flash report showed weak economic activity in April. The latest GDP data for the first quarter was disappointing.
Before this weakness translates into a decline in inflation, the Federal Reserve may remain cautious about cutting interest rates, which will continue to be a resistance for Bitcoin.
The price of Bitcoin is currently locked near the lower limit of the range of $60,000 to $74,000 for several weeks. Despite recent unfavorable macroeconomic conditions and a slowdown in ETF flows, BTC remains within this range, with ETF flows on Thursday amounting to $217 million.
Some believe that the strong growth of stablecoins indicates that capital inflows into the cryptocurrency market remain strong. According to data from DeFi Llama, the market capitalization of stablecoins has reached its highest level since June 2022, reaching $158 billion.
Since the end of October, the price of Bitcoin has risen by $34 billion, and continued growth may keep the price of Bitcoin rising. Any weakness in the growth of stablecoins may signal an imminent decline in the price of Bitcoin.
Bitcoin currently faces the risk of breaking below the range low of around $60,000, which would open the door to support at $53,000.
However, in the long run, most people are confident that Bitcoin is entering a bull market. Last week, Bitcoin underwent its fourth halving. The halving of Bitcoin issuance undoubtedly pushed prices to new highs in several quarters.
Bitcoin broke the previous historical pattern and hit new highs before this halving, thanks to demand from ETFs. This arguably increases the risk of correction after the halving. But this should not harm the long-term prospects.
The long-term trend remains an increase in the adoption of TradFi and investment in the asset, and the launch of ETFs now accelerates this trend. The macroeconomy will also be a major long-term driver. Unsustainable borrowing by major economies means that global currency devaluation will continue.
As preached by Wall Street giants like Larry Fink of BlackRock, Bitcoin is "digital gold," and as this narrative continues to evolve, Bitcoin will be a big winner alongside other hard assets.
At the same time, Bitcoin will continue to benefit from its technological adoption. Globally, more and more people are understanding the utility of decentralized, censorship-resistant, borderless, and permissionless payment technologies.
Meanwhile, cryptocurrency companies continue to build centralized and decentralized platforms, enhancing the utility of Bitcoin and its accessibility to the public. Bitcoin is likely to challenge $100,000 at some point in 2024 or 2025. |
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Post time 7-5-2024 20:34:35