BTC holds below 70K after CPI data: Is this a pause before a rally?

Bitcoin rallied back on Wednesday, June 12, recovering from the drawdowns occasioned by weak U.S. employment data. The snap surge to $69,636 on Bitstamp after May’s Consumer Price Index (CPI) data showed inflation had eased faster than expected. The Consumer Price Index (CPI) remained flat compared to the previous month, while the annual inflation rate was 3.3% – both figures falling 0.1% below market expectations.

Despite the Federal Reserve keeping interest rates steady at the current range of 5.25% to 5.5%, analysts now predict a rate cut as early as September. This is a sharp turnaround from last week’s expectations, which dismissed any potential cuts following a surprisingly strong U.S. jobs report. The report exceeded analyst forecasts, showing a 272,000 increase in nonfarm payrolls compared to the anticipated 190,000 increase.

News of easing inflation sent markets rallying, with the S&P 500 and Nasdaq composite climbing 0.3% and 0.7%, respectively, in early Thursday trading. This could be a good sign for Bitcoin since its price movements have been correlated with stock market movements. However, at the time of writing, Bitcoin is struggling to break past $68,000 in what some analysts see as range-bound movement — as buyers remain averse due to the Fed’s continued hawkish stance on interest rates

Is this a consolidation before a BTC uptrend?

Some analysts expect BTC to stay in a holding pattern, as several policymakers call for no rate cuts this year with inflation yet to be subdued to a desirable level. Furthermore, the Fed hiked its Core PCE inflation forecast from 2.6% to 2.8% for this year, meaning a rate cut could be off the table for longer — not great news for Bitcoin holders.

History demonstrates why the Fed maintaining higher interest rates for an extended period is not good news for Bitcoin holders. In 2022 and 2023, the Federal Reserve’s aggressive interest rate hikes, culminating in a 5.25% – 5.50% target range by 23 July 2023, coincided with a depressed period for Bitcoin.

The cryptocurrency struggled to regain its previous highs, only managing a gradual recovery from a low of around $15,000 after the FTX collapse to around $30,000 by the end of the Fed’s tightening cycle. This highlighted Bitcoin’s historical difficulty in thriving during periods of rising interest rates.

There is, however, hope for some respite. Most retail investors on Binance are still bullish on the digital asset with crypto tracker Hyblock, noting that the number of accounts holding a net long position in Bitcoin has surged to 70.25%, marking a significant increase from 57% just 24 hours ago.

High-profile traders such as Daan Crypto Trades, are also bullish on the asset, but according to him, the asset needs a liquidity boost in the short-term to see a rebound. This boost might come soon enough for Bitcoin bulls, as Microstrategy, the largest corporate BTC holder, revealed a proposed $500 million convertible senior note offering, with the proceeds intended primarily for the acquisition of additional Bitcoin.

Analysts also see ETF inflows as another possible catalyst for BTC’s upside. With $100 million worth of inflows witnessed on Wednesday, 12 June, and a possible $500 million Microstrategy pump, BTC could be set for a major rebound.

Technical analysis: Is a price bounce imminent?

At the time of writing, BTC is stuck in a holding range, struggling to decisively break through the $67,000 mark. If a significant rebound is witnessed, bulls might struggle to breach the $68,665 mark, a level that has held before. A further slide though would likely see the $66,127 mark, an area of previous support.

Analysts also note that the RSI is holding flat close to the 50 midline, and prices are almost touching the lower boundary of the Bollinger Bands, an indicator of oversold conditions — meaning that prices could rally albeit at a soft pace.