Bitcoin traders exercise caution ahead of US Core PCE Price Index release
- Bitcoin price winds around $28,000 as traders anticipate the release of US Core PCE Price Index data on August 31.
- The consensus is that the Core PCE inflation will rise by 0.1% and come in at 4.2% for July.
- Being the Fed's preferred gauge of inflation, PCE numbers could influence expectations of further rate hikes in the US.
Bitcoin price rallied to $28,100 on Tuesday, in response to Grayscale’s victory against the Securities and Exchange Commission (SEC) in its spot Bitcoin ETF lawsuit. Since then, BTC price wiped out its gains, declining to $27,300 as traders exercised caution ahead of the August 31 release of US Core PCE Price Index for July.
The data could make or break Bitcoin’s run up to the $30,000 level as US Core PCE is considered the Federal Reserve’s preferred inflation gauge and the market expectation is for an annual rate of 4.2% for July, against Fed’s 2% target for inflation.
Also read: Whales push AAVE, COMP, CRV market caps higher, kick off week with extreme activity
Fed’s preferred inflation gauge could determine the direction of Bitcoin price trend
The US Bureau of Economic Analysis (BEA) is set to release Core Personal Consumption Expenditure (PCE) Price Index on Thursday, August 31 at 12:30 GMT. As we move closer to the data release, the market’s expectation is a 0.1% increase to send Core PCE YoY rate for July to 4.2%.
An increase above market expectations adds to the likelihood of an interest rate hike by the Fed in September. If the increase in Core PCE rate is 0.1% or lower, it points at a slowdown in inflation and less likelihood of interest rate hikes.
Bitcoin traders are likely to benefit from a slowdown in inflation, as leverage becomes cheaper and capital inflow to BTC and risk assets increases.
Bitcoin price rally to $30,000 therefore relies on the data release, as crypto traders continue to closely monitor macroeconomic indicators.
At the time of writing, BTC price is up 5% over the past week and noted a 1.27% drop on the day, on Binance.
Bitcoin, altcoins, stablecoins FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
What are altcoins?
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are stablecoins?
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
