Bitcoin Weekly Forecast: How PPI fits into BTC’s bear market rally

• Bitcoin price takes off from the lower trend line of the falling wedge after five months of stagnation.
• Transaction data shows that the next hurdle is at $20,242, where nearly 5.2 million addresses are holding roughly 2.56 million BTC at a loss.
• Invalidation of the bullish thesis will occur on the flip of the $15,551 support level into a resistance barrier.

Bitcoin price shows a healthy start of an uptrend, albeit a slow one after weeks of tight consolidation. This bullish outlook has strong reasons to continue, but investors need to consider all possible scenarios. 

Also Read: Bitcoin Weekly Forecast: Assessing chances of one last bear market rally for 2022

Producer Price Index and its role in bear market rally

One possible risk factor for Bitcoin price could be the level of interest rates set by the US Federal Reserve, as this impacts two factors relevant to BTC price: borrowing costs and the value of the US Dollar. 

Bitcoin is priced in US Dollars, so if the value of the USD goes up, it tends to have a negative effect on BTC price and vice versa if it falls. Borrowing costs impact cryptocurrencies because many crypto investors and traders use loans and margin to buy crypto assets. A rise in borrowing costs, therefore, can also negatively impact demand and hence price. 

A key macroeconomic release that is likely to impact the level at which the Federal Reserve sets interest rates is the Producer Price Index (PPI) which measures inflationary trends in wholesale goods or changes in the ‘factory gate’ prices of goods. This is scheduled to be announced today at 01:30 GMT. 

The PPI is expected to come in lower than the previous year’s 6.7% as a result of action already taken by the Federal Reserve, which has been increasing rates for some time now. The consensus expectation is for PPI to be 5.9%; anything above this number will likely suggest inflationary pressures are still strong and the Fed needs to continue hiking interest rates at an aggressive pace. This will strengthen the Dollar and raise borrowing costs which are both negative for cryptos. It could, therefore, trigger a minor downtick in Bitcoin price. 

This brief pullback could be a blessing in disguise, however, if Bitcoin price can find a footing at the $16,450 support level and rally. Accumulating here with the expectation of a move to $20,000 or $30,000 would yield maximum returns for sidelined buyers.

Also Read: Can Fed’s decision provide an opportunity before Bitcoin price rallies to $25,000?

Bitcoin price and its optimistic narrative

A further sign Bitcoin price could rally comes from its dissonance with momentum. Whilst Bitcoin price has produced a string of lower lows, the Relative Strength Index (RSI), in contrast, has produced a set of higher highs. This lack of conformity suggests downside momentum is waning. Therefore, this technical formation often leads to a trend reversal. In BTC’s case, the shift would be in the bulls’ favor.

This outlook was mentioned weeks ago by FXStreet, and since then, Bitcoin price has rallied 11.80%. This trend should continue pushing the big crypto higher until it approaches the 2022 volume Point of Control (POC) at $19,089. This is the highest traded volume level for BTC, making it a tough hurdle.

Overcoming this blockade will allow Bitcoin price to aim for the next targets at $20,242 and the $25,000 and $30,000 psychological levels. 

BTC/USDT 3-day chart

Also read: Three on-chain metrics suggest Bitcoin price has bottomed, here’s where BTC is going next

While the bullish outlook makes sense for Bitcoin price from a technical standpoint, on-chain metrics are also suggesting a similar outlook. IntoTheBlock’s Global In/Out of the Money (GIOM) model shows that there are two crucial hurdles for BTC.

The $20,242 is a significant resistance level where roughly 5.2 million addresses that purchased 2.56 million BTC, are “Out of the Money.” Therefore, a Bitcoin price rally into this level is likely to see a massive spike in selling pressure as some of these investors decide to offload their holdings in order to breakeven.

Hence, the technical outlook mentions that a flip of the $20,242 level will open the path for bulls to extend their run-up to $30,000 or higher.

BTC GIOM

While the technical outlook is optimistic for Bitcoin price, investors should note that the $15,551 level is where BTC formed equal lows, and resting below these swing lows is sell-stop liquidity that market makers could target.

Should Bitcoin price crash lower, it will be to collect this liquidity. A quick recovery after this move can be considered as smart money accumulation, but a three-day candlestick close below $15,551 will invalidate the bullish thesis. 

In this case, Bitcoin price could revisit the potential macro bottom levels, extending from $13,575 to $11,898. 

Interestingly, the immediate support level seen in the GIOM extends from $16,622 to $9,735. Here, roughly 5 million addresses that accumulated 2.14 million BTC at an average price of $12,750 are “In the Money.” A slide into this territory will be an opportune moment for these investors to add more to their holdings, adding credence to the possibility it may provide a bottom for the market.

 

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