Alex Dovbnya
Bitcoin, the world’s leading cryptocurrency, faced an uphill battle in an attempt to break the resistance level
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On the back of fresh Consumer Price Index (CPI) data, Bitcoin again struggled to break its key resistance level and returned to its starting point after almost breaking through $31,000.
As Glassnode co-founder Yann Allemann pointed out, the cryptocurrency’s rapid rise and subsequent fall was fueled by carefully placed buy and sell barriers designed to limit volatility. Bitcoin’s muted reaction to the CPI data suggests that economic indicators may already be priced in.
Bollinger Bands, a tool used by traders to identify periods of high and low market volatility, narrowed to their lowest level since January just before the CPI data was released. This tightening triggered an abrupt surge in Bitcoin price. This surge was short-lived, however, as buy and sell barriers erected in anticipation of volatility successfully dampened anticipated price swings.
Allemann notes that despite these updates, open interest in Bitcoin remains low with little sign of positioning ahead of the CPI data release.
The cryptocurrency market appears to be waiting for fresh capital inflows, suggesting a potential stall in Bitcoin price momentum.
Interestingly, the macro environment could turn in Bitcoin’s favour. With annual CPI inflation hitting 3% in June, slightly below the market forecast of 3.1%, and core CPI inflation at 4.8%, the Federal Reserve could turn to a more dovish stance on monetary policy.
This shift, coupled with the US Dollar Index (DXY) hitting a two-month low of 101.16, may ease some of the pressure on Bitcoin and give it the scope it needs to rally higher.
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