Bitcoin rebounds from $33K-support as US dollar inflation comes back into focus

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Bitcoin is back in the news after briefly hitting a fresh all-time high of $33,000 late on June 2. But is the rally sustainable? Will the Bitcoin price achieve parity with the US dollar, or will it continue to fall as the Federal Reserve hikes its benchmark interest rate again this year?

It seems like every week after a fresh price fall, Bitcoin bounces back to $33K support. I’m sticking to my positive view on Bitcoin: If the price were to fall a lot further, it would be a red flag, and I would buy more coins to cover my exposure. But I also realize that it’s very easy to become obsessed with some price point, and lose track of the bigger picture. I think it’s useful to take a step back and ask ourselves, what’s the real cause of these wild price swings?

Bitcoin (BTC) prices steadied on Tuesday after closing the previous session at a 3.41% loss, supported by a weakening dollar sentiment ahead of a key United States’ inflation report due later today.

Spot BTC/USD exchange rate rose by a modest 1.31% to $33,096 after bottoming out on Monday at $32,996 on Coinbase exchange. The CME Bitcoin Futures was up 1.64% from its previous session’s low of $32,600.

Bitcoin Futures reclaimed the $33,000-support after briefly flipping it late Monday. Source: TradingView

Bitcoin rebounds from $33K-support as US dollar inflation comes back into focus

Meanwhile, the US dollar index was down about 0.03% ahead of the London opening bell. The index represents the greenback’s strength against a basket of top foreign currencies.

Inflation data awaited

Bitcoin and the dollar moved inversely in the week of key inflation reports and a crucial congressional testimony from the Federal Reserve Chairman Jerome Powell.

On Tuesday, the US Consumer-Price Index (CPI) expects to post another significant spike in June, highlighting a run-up in inflation as the economy attempts to recover from the coronavirus pandemic slowdown. A Reuters poll of economists noted that the CPI might have increased by 0.5% from May and 4.9% from a year earlier.

Many traders bet on Bitcoin against the prospects of higher inflation, partly due to popular narratives that project the flagship cryptocurrency as a hedge against central banks’ inflationary policies that hurt fiat currencies’ purchasing power.

Inflation is killing your savings account.

Powering power. #Bitcoin

— David Gokhshtein (@davidgokhshtein) July 11, 2021

In detail, the Federal Reserve has been running a $120 billion monthly asset purchase program since March 2020 while keeping its benchmark lending rate near zero. As a result, the U.S. central bank’s policies have doubled the size of its balance sheet to more than $8 trillion. Meanwhile, the same period has witnessed Bitcoin spiking by up to 1,528%—from $3,858 to almost $65,000.

The cryptocurrency declined by more than half by the said mid-April peak but sustained its overall bullish bias by relentlessly holding $30,000 as its psychological price floor. The support came extremely handy following the previous two CPI reports showing that inflation jumped to 4.2% in April and 4.9% in May.

“The uptick in the CPI readings is an indication that the economy has not healed completely from the pangs of the pandemic, and the crypto market is trailing the negative inflation figures,” Gustavo De La Torre, director of business development at N.exchange, told Cointelegraph. He added that lower Bitcoin prices combined mixed economic outlook would drive more investors to accumulate the cryptocurrency.

“Should the buyup intensify, a price push up to $40,000 for Bitcoin may be seen in the short term,” added De La Torre.

Bitcoin supply held by whales with a balance of 1K-10K spiked as BTC trades near $30,000. Source: Glassnode

Bitcoin rebounds from $33K-support as US dollar inflation comes back into focus

“Retail has been buying heavily for weeks now, but we finally got the uptick in whales that we were waiting for,” noted Will Clemente, an independent market analyst.

“There were 17 new whales birthed on the blockchain this week, while at the same time the overall holdings of whales increase up by 65,429 BTC.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Emilia James
By Emilia James

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