Author: Mary Liu, BitpushNews
Higher-than-expected U.S. Consumer Price Index (CPI) data weighed on crypto markets, with Bitcoin trading near the $69,000 support level in early trading on Wednesday, but falling to a low of $67,475 following the release of the CPI. BTC subsequently recovered the $69,000 loss and returned to $69,861.99 at press time, a 24-hour gain of 1.03%.
Altcoin markets were mixed. Memecoin ( MEME ) led the way with a 15.7% gain, followed by Ethena ( ENA ) with a 14.4% gain.
Uniswap (UNI) fell the most, down 10%, after the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to Uniswap Labs. Other tokens that fell significantly included Theta Fuel (TFUEL) down 9% and Axelar (AXL) down 8.5%.
Data showed that CPI rose 0.4% in March, in line with expectations of 0.3%; it rose 3.5% year-on-year, in line with expectations of 3.4%, which means that US inflation is not well controlled. Although other indicators show that the economy is performing better than expected, it still hits investors' expectations that the Federal Reserve will cut interest rates sometime this summer.
The 10-year U.S. Treasury yield hit its highest level since November, climbing nearly 20 basis points. Meanwhile, the U.S. dollar index (DXY) surged 1% to above 105, hitting its highest level since November 2023.
Traders are rethinking bets on the Federal Reserve to cut interest rates. The CME FedWatch tool currently shows that expectations for a rate cut in June have fallen to 19%, while the probability of a rate cut in July is now 44%. Yesterday, those figures were 57% and 74%, respectively.
The U.S. benchmark stock index hit its lowest level in nearly four weeks during the session. As of Wednesday's close, the Dow Jones Industrial Average initially closed down 420 points, or 1%, the S&P 500 fell 0.95%, and the Nasdaq fell 0.84%.
Bitcoin whales “buy the dip” after CPI
Despite the “hot” CPI data, BTC price trend reversed upward. Trading platform Material Indicators tracked an increase in buying volume on Binance, the world’s largest exchange, proving that whales may be buying on dips.
“FireCharts’ classified CVD (one of the proprietary trading indicators) showed that whales bought the dip in BTC and just like that, Bitcoin is back above $69,000 and the daily candle is green again,” the company said in a post on X.
Meanwhile, trader Daan Crypto Trades noted that the CME gap created by this weekend’s break below $68,000 has narrowed as the Consumer Price Index (CPI) has risen, and has so far rebounded from the gap close level.
Short-term volatility
Alan Scott, a RAILGUN contributor, said: “As the halving approaches, all eyes are on Bitcoin, but one major factor may make this cycle different from other cycles. Because Bitcoin reached an all-time high before the halving, which is the first time in the history of cryptocurrency, there is greater selling pressure.”
“Short-term holders who bought Bitcoin at higher prices will keep selling, selling, selling, changing their asset allocation and taking profits,” he said. “It’s also worth noting that the April 15-May 1 tax season removes liquidity from the system, which tends to have a negative impact on short-term price movements.”
“This could make Bitcoin volatile for quite some time after the halving,” Scott warned. “Macroeconomic events, such as the Fed’s quantitative tightening, could cause Bitcoin to fall as more liquidity is removed from the market. While cryptocurrencies have indeed recovered this year, it’s worth noting that there are a number of factors that could cause Bitcoin to struggle.”
However, one possible buffer against price declines after the halving is the supply of Bitcoin on exchanges, which has been steadily declining in recent months.
Julio Moreno, head of research at cryptocurrency analysis firm CryptoQuant, said that although the new issuance will be halved after the halving, the demand for Bitcoin is expected to continue to increase. Moreno wrote on the X platform: "The US dollar inflation is accelerating, and the Bitcoin inflation rate will be halved next week."
Data provided by CryptoQuant shows that Bitcoin’s demand growth is currently “around all-time highs (11% month-on-month)”, driven primarily by large holders and whales.
As banks such as Morgan Stanley and UBS compete to provide clients with spot Bitcoin exchange-traded funds (ETFs), demand is expected to continue to rise. In addition, according to Tencent Finance's "First Line" report, Harvest and Hua Xia have been approved for "cryptocurrency circle" asset management qualifications in Hong Kong, and Hong Kong's Bitcoin spot ETF will be on the shelves as early as the end of April.
Based on these factors, market analyst Rekt Capital believes that any price drop in Bitcoin between now and the halving could trigger a rapid rebound.
Another person who is not optimistic about the short-term trend recently is BitMEX co-founder Arthur Hayes, who believes that risk assets will be extremely weak before May 1, and the halving and the "series of tricks" of the Federal Reserve and the Treasury are the reasons why he decided to "give up trading before May." However, Hayes remains optimistic about the medium-term trend.
