- US inflation data was hotter than expected, triggering a temporary market slump.
- Bitwise’s CIO claimed that US CPI data has less impact on BTC price action.
After the release of unexpectedly hot US CPI (Consumer Price Index) data on April 10, there was a temporary bloodbath in the markets. The consumer price index (CPI) was 3.5% year-on-year, while inflation growth was 0.4% month-on-month.
That meant inflation was rising, not falling, leading analysts to believe the Fed's expected rate cuts from June could be in limbo. Based on negative data, Bitcoin [BTC] fell to $67.5k before a quick recovery.
Bitwise CIO Matt Hougan, however dismissed the impact of US CPI data on BTC price action and noted that
“I do not believe this move will dent the above-expected CPI. Whether or not the Fed cut interest rates by 25 basis points in June is not the long-term driver of Bitcoin prices at this time. It’s a marginal factor.”
The Bitwise manager added:
“ETF inflows + rising deficits are more important and fit Bitcoin very well.”
Bitcoin regains $70,000
The executive pointed to rising U.S. deficits that have worried some key figures like Galaxy-Digital Mike Novogratz.
Deficits arise when government spending exceeds government revenue and government debt increases. These are ideal conditions for a currency devaluation, for example the US dollar. Bitcoin and gold can benefit in such scenarios.
However, the US President confirmed possible interest rate cuts by the Fed later in the year. Some market observers believe that this was the breather and ended the temporary market bloodbath on April 10th.
At the time of writing, BTC was trading at $70.7K, above a key trendline resistance as the halving event drew ever closer.
However, open interest (OI) rates fluctuated, according to Coinglass data. OI tracks open contracts on the futures market and therefore the amount of money invested in BTC (liquidity).
This shows the market's short-term indecision regarding the approach of a halving and urges caution.
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