Cryptocurrency and equity markets took a bit of a dip on August 9, as traders got a bit impatient with the release of the US Consumer Price Index (CPI) report on Wednesday. Details in the report will shed light on whether the Federal Reserve’s aggressive rate hikes are effective in curbing runaway inflation and could have an impact on the size of future hikes.
Earlier in the week, Tesla CEO Elon Musk suggested that July’s data will reflect that the US is reaching peak inflation and that any recession will be “mild to moderate.” At present, the consensus is that the July data will be lower than the record figure of 9.1% recorded in June. The price of energy commodities (oil, natural gas) fell sharply in July and the Fed expects the previous consecutive increases of 0.75 basis points to combat the rise in prices in other sectors of the economy.
As usual, Bitcoin (BTC), Ethereu (ETH) and most of the altcoins pulled back as traders fret ahead of the CPI data release. BTC price fell to $22,800, while Ether fell back to $1,670. The reasoning that traders are taking refuge in stablecoins makes sense, but from a technical analysis point of view, the Aug. 9 pullback is simply a test of lower support after the most recent support-resistance flip of the week. last week, and large-cap assets like ETH and BTC continue to trade within their familiar multi-week ranges.
Traders take precautions until IPC data is released
According to independent market analyst Michaël van de Poppe, the fear surrounding the CPI data for August 10 is “unjustifiedand once the series of pullbacks completes, the price of BTC should rise to $28,000.
#bitcoin correcting due to several reasons.
â–«ï¸ (Unwarranted) fears among CPI data tomorrow.
â–«ï¸ Resistance around $24.3K continuing to be resistance.Expecting to see a test around $23-23.2K to hold, so trend continues.
Another test of resistance -> break-out towards $28K. pic.twitter.com/hqcJ6Ry64c
— Michael van de Poppe (@CryptoMichNL) August 9, 2022
Adding to the narrative that the current pullback was “expected”, trader “52kskew” He suggested that BTC price action is being impacted by a “healthy easing in perpetual futures” while spot Bitcoin is selling at a “logical resistance.”
$BTC Healthy unwinding in perps underground.
spot being sold off at logical resistance. pic.twitter.com/Fj8hgSjDNV— Δ (@52kskew) August 9, 2022
The pseudonymous trader “Big Smokey” explained that the market-wide correction is simply “decreasing risk for traders awaiting the release of this week’s CPI data.”
Just a lil de-risking from traders awaiting this week’s CPI print. Up or down who knows, but some traders seem to be interpreting recent statements from the Fed + post CPI print market performance as a sign they’ve gone “dovish.” Still swinging spot longs personally.
— Big Smokey (@big_smokey1) August 9, 2022
According to Big Smokey, there continues to be a tendency for traders to “read recent Fed statements and market behavior following the release of CPI data” as dovish, and if this trend continues, the market could rebound if the figures of inflation are lower than those of June.
Analyst DyLeClair, on the other hand, believe that in the grand scheme of things, stocks are in the “late stages of a bear market rally” and suggested that BTC will return to previous lows in the next 6-12 months if a “correlation 1.0 event” occurs.
i believe we are in the late stages of an equities bear market rally (if it’s not already over)
BTC will not be catching a bid during a large equity market selloff
i have dry powder set aside for a correlation to 1.0 event that likely occurs over the next 6-12 months pic.twitter.com/Fx1iARy8ZO
— Dylan LeClair (@DylanLeClair_) August 9, 2022
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