Bitcoin price booms as inflation undershoots consensus

Bitcoin (BTC) price shot higher early Tuesday as US inflation, both the core and the overall number, are coming out lower than expected. Both data points broke below the lowest estimation from analysts and triggered an upside surprise mainly caused by energy prices. Food and rent are still causing the most headaches for households, but their budget is getting some air while the Fed is now sure to hike only 50 basis points on Wednesday instead of the feared 75. 

BTC is undeniably interconnected with global markets as of this year

Bitcoin price jumped over 4% and breached through the lines of the bears as it trashed the 55-day Simple Moving Average (SMA) at $18,038 on the back of US inflation numbers. US inflation, or inflation overall, has been the key motivation for why cryptocurrencies have not been moving higher as households suddenly had to balance their budget as there was no spare money to allocate to cryptocurrencies as an investment. As inflation clearly abates, the Fed will hike less quickly, and households will start to see more money at the end of the month, which will pour into crypto soon.

BTC is thus breaking above the $18,038 key level with the 55-day SMA and the monthly pivot. It will be key to see if bulls can close above there this evening at the US closing bell. Expect when that happens to see $19,036 being tested by the end of this week, or even broken if the Fed comes out dovish on Wednesday night. If all start aligning, 16% or 21% could be in the cards for the last weeks of 2022. 

BTC/USD daily chart

Risk to the downside comes with a fade of a bull trap should BTC not be able to close above the mentioned $18,033 level. That could see an acceleration should Powell deliver a very hawkish speech and warn for preemptive partying in markets as inflation is still not done. That could be a cold shower for markets and push BTC back toward $17,000 by Wednesday evening after the Fed meeting and possibly even $16,020 should the message counteract the current sentiment.