Bitcoin continues trading sideways, will BTC break out of limbo with US PPI data release?

US Producer Price Index (PPI) for final demand moved up 7.4% on an unadjusted basis. The upside surprise implies inflation is elevated and cryptocurrencies are expected to slide lower. Traders could pull out of risk assets like Bitcoin as the US Federal Reserve moves ahead with a continued rate hike. Bitcoin price is currently in an uptrend on the daily chart, but for bulls to realize their advantage, BTC needs higher volatility. 

Previously, the US Consumer Price Index (CPI) data release has acted as a trigger for large swings in Bitcoin price. The next release is scheduled for December 13. The largest asset by market capitalization could therefore break out of its limbo and sideways price action close to the release date. 

Also read: SEC order attempts to assess health of crypto industry after FTX exchange fallout

Bitcoin price could nosedive with US PPI data release

Bitcoin traders brace for impact as US PPI data is released. The Producer Price Index measures the average change over time in the selling prices that domestic producers receive for their output. 

With a higher than projected increase in PPI, it is conclusive that inflation is here to stay and risk assets like Bitcoin could suffer a downside from bearish sentiment among traders. In November, most of the increase in the index for final demand is attributable to a 0.4% advance

in prices for final demand services. Prices for final demand less food, energy, and trade services moved up 0.3% in November after rising 0.2% in October. 

US PPI data one-month and twelve-month percent changes

The Consumer Price Index (CPI) measures the change in the prices of goods and services contained in a basket of consumer items. The US Federal Reserve, the country’s central bank, pays very close attention to this figure as it plays a key role in maintaining price stability.

CPI data influences sentiment amongst traders in traditional stock markets, and the same is true for risk assets like Bitcoin and cryptocurrencies. Historically, in the days leading up to the release of CPI data there is a spike in trade volume and Bitcoin price yields gains. An increase in inflation wipes out gains in the days following the announcement, and trade volume declines until another catalyst gives bulls the advantage. 

An increase in the price of consumer goods and services results in capital outflow from risk assets like Bitcoin and increases the selling pressure on BTC, coupled with large price swings. Bitcoin is currently trading sideways with the CPI data release a week away. 

Jim Wyckoff, Senior technical analyst at Kitco notes that,

Prices are now pausing but are still in a fledgling uptrend on the daily bar chart. Bulls have a very slight near-term technical advantage but need to show fresh power soon to keep it.

Expert opinion on US CPI expectation

Clifford Bennett, chief economist at ACY Securities believes that the US Federal Reserve could slow the pace at which it raises interest rates with a moderate CPI print. This would have the effect of weakening the US Dollar, which in turn would have a positive effect on the prices of assets and commodities priced in US Dollars, such as Bitcoin and other cryptocurrencies. 

US CPI data released on November 10, 2022

Michael Hewson, Chief Market Analyst at CMC markets argues that given Federal Reserve Chairman Jerome Powell’s comments at the Brookings Institute last week, the pace of interest rate hikes is likely to slow down from 75 to 50 bps per meeting. 

Traders will also get an insight into consumer inflation expectations with the latest December University of Michigan inflation expectations numbers for 1 year and 5-10 year, scheduled to be released at 18:30 GMT later on Friday, November 9, with the previous forecasts at 4.9% and 3% respectively. 

What to expect from Bitcoin price

A deep dive in Bitcoin price trend reveals that the asset is currently trading between the $16,000 and $17,500 level. After a successful retest of the $17,100 level, bulls gained an advantage and pushed BTC to $17,260. 

If Bitcoin price extends its gains, it could target the resistance at the 50-day Exponential Moving Average (EMA) at $17,744 level. A decline below $16,600 could send BTC to the range low of $16,000 and invalidate the bullish thesis. 

BTC/USDT price chart

With fast spreading FTX contagion and crypto firms filing for bankruptcy, the key price levels to watch out for are between $18,000 to $19,700 and $16,000 to $17,500. Bitcoin price could nosedive to the range low of $15,900 based on the PPI data release. BTC needs buyers to line up for bulls to gain an advantage and push Bitcoin higher ahead of CPI data release. 

Once CPI data is out, Bitcoin price could witness large swings and finalize the boundaries of consolidation from the above mentioned price levels.