Bitcoin faces a tough macro test and ETFs bleed, where next for BTC?

Bitcoin is hovering around $83.5K as it attempts to recover from last week's dip towards $80,000, with several key macro factors in play. 

The largest cryptocurrency remains above the 80k psychological level ahead of this week's U.S. inflation data and several speeches from Federal Reserve officials, including Chair Kevin Warsh. 

US CPI, PPI and Fed chair warsh 

U.S. CPI data on Wednesday and PPI figures on Thursday will provide this week's major catalysts for risk assets ahead of the FOMC rate decision on October 28. 

Expectations are for CPI to rise to 3.7% year on year in September, up from 3.4% in August, amid the ongoing conflict in the Middle East, which is keeping energy prices elevated. Meanwhile, PPI is expected to rise 0.3%, up from 0.2%. 

Crypto, along with equities and gold, often benefits from cooler-than-expected inflation data, as it reduce the odds of the Federal Reserve tightening monetary policy and financial conditions. However, hotter-than-expected inflation could push Treasury yields and the dollar higher, putting pressure on Bitcoin. 

The market is not expecting the Fed to hike rates in October, with the CME FedWatch tool showing just an 18% chance of a 25-basis-point rate hike on October 28. However, a December rate hike is still very much on the table, with the market pricing in an 87% chance of the Fed hiking by at least 25 basis points. 

Federal Reserve Chair Kevin Warsh is also due to take part in a discussion with Kristalina Georgieva, Managing Director of the International Monetary Fund, on Thursday. Two other closely followed Fed officials, Governor Christopher Waller and Cleveland Fed President Beth Hammack, are also speaking. This is the last week before the blackout period, so Fed comments following CPI data could give markets a clearer idea of what to expect from the Fed in October. 

Bond rout and Oil prices remain key drivers 

In addition to U.S. CPI data, attention will also remain on U.S. bond yields, which have come off the 24-year highs reached last week but remain elevated. The 10-year and 30-year yields are at 5.24% and 5.6%, respectively. 

The Treasury market is closed on Monday for a public holiday, but the CPI release and Fed speeches will keep Treasury markets in focus later in the week. 

Oil prices also remain key. Prices dropped in early Asian trading after Trump's announcement that his administration had reached an agreement for Russia to supply 300,000 metric tonnes of diesel to domestic and international markets. This helped push oil prices more than 1% lower, below $90 earlier today, although they have since recovered above $92. 

Oil prices remain closely linked to inflation concerns, so further moves could affect the bond market and risk sentiment. 

ETF inflows stall 

Bitcoin ETFs have seen outflows even as BTC recovered from below $81K. Spot Bitcoin ETFs recorded $681.1 million in net outflows last week, ending three straight weeks of net inflows. October outflows have reached $388.5 million, following three straight months of net inflows, signalling more cautious institutional sentiment. Should outflows increase, Bitcoin could come under further pressure. 

BTC technical analysis

Bitcoin trades above its 50- and 200-day EMAs, keeping the longer-term outlook constructive. The price briefly fell below $81K last week but has recovered to around $83.5K, where it is testing resistance of the 20 EMA. The RSI is mildly positive at 53, although momentum remains limited. 

Should momentum pick up, BTC will look to rise above the 20 EMA towards $87K, the September high. Above here, attention turns to $90K, the psychological level, followed by $95K. 

Failure to break above the 20 EMA could see the price fall back towards the 50 EMA around $80K. A break below this level would expose the 200 EMA around $75K, below the September low.