The price of Bitcoin fell today following new US inflation data, with investors wondering how long the Fed’s interest rate hike will last.
The trend that propelled Bitcoin to the forefront
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$22,990 of
On February 16 and February 20 the price appears to have declined initially to the 2023 high of $25,000. Pause on the rising U.S. pace. more than expected Inflation appears tied to data, the possibility of a higher interest rate hike by the Federal Reserve and the possibility of more long money.
The bitcoin price decline follows a broader market decline, and analysts fear that the crypto market continues to face significant risk from interest rate decisions by the United States Federal Reserve.
Let’s take a closer look at the factors affecting the price of Bitcoin today.
Stocks fall at statistically higher inflation
Stocks and Bitcoin fell after the Bureau of Economic Analysis (BEA) released a personal consumption expenditure (PCE) report on February 24 that showed inflation rose 5.4% in January from in the previous year. Core inflation, one of the Federal Reserve’s preferred tools for measuring inflation, was 4.7% higher than in January 2022.
PCE Price Index. Source: BEA
While the correlation between Bitcoin and stocks hits its lowest level since 2021 on February 22, Bitcoin price is closely linked to equities and the stock market. Investors have previously expressed serious concerns about a possible impending slowdown in the US economy.
Bitcoin, Dow Jones Index, Nasdaq, and S&P 500. Source: TradingView
While some analysts believe Bitcoin’s current price represents a once-in-a-generation buying opportunity at current levels, others believe BTC’s close correlation with the US Dollar Index (DXY) and equities e will allow the price to maintain a level of $24,000. manifested by the weakness of
Bitcoin price is responding to the market consensus expectation that inflation is still not under control which will cause the Federal Reserve to continue to raise interest rates.
Rising interest rates in the US and abroad are weighing on the Bitcoin price
The PCE report is the Federal Reserve’s preferred tool for measuring inflation. And with Federal Reserve Chairman Powell still aiming for 2% overall inflation, another interest rate rise is expected. Inflation has been a decisive factor in raising interest rates. To combat inflation, Chairman Powell may not be able to pursue an aggressive rate hike plan.
The PCE report leads the market to speculate that a 0.5% interest rate hike is possible at the FOMC meeting on 22 March.
The possibility of a rate rise. Source: CME Group
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Above 100 2023
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After persistently sticky inflation, some analysts believe that Bitcoin is in for a cold winter and the price may continue to see volatility heading into the FOMC.
On February 24th, over $95 million in Bitcoin longs were liquidated in a span of 5 hours.When BTC longs are liquidated without buying pressure from trading volume, the price of Bitcoin is negatively impacted . . . . While China’s recent currency easing injected $92 billion of liquidity into the Chinese economy, that hasn’t stopped the appetite for BTC from waning.
BTC liquidity. Source: Coinglass
Is There Any Chance of Bitcoin Price Reversal?
On January 23 and January 24, the Bitcoin futures market saw $230 million in long position liquidation. This put some pressure on the BTC price. When BTC longs are eliminated without buying pressure from trading volume, the price of Bitcoin is negatively affected.
Actual BTC-USD daily volume. Source: Privacy Research
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The recent increase in Bitcoin trading volume may be due to the removal of trading fees by Binance. Vetel Lunde, principal analyst at Arcane Research, speculated from the data:
“However, after Binance removed the trading fees, volumes are still focused on Binance. Volumes on other spot exchanges have sat below peaks since January at $680m, as the volume of Binance still exceeds the volume of let
