Sun June 2, 2024 ▪
4
min reading ▪ acc
Bitcoin’s volatility continues to captivate investors around the world, and recent economic developments in the United States may well decide its next big move. As expectations turn to the imminent release of inflation data, an interesting correlation between the Consumer Price Index (CPI) and Bitcoin’s volatility has come to light.
Lower CPI: the key to a new all-time high?
Markus Thielen, chief analyst at 10x Research, recently stated that Bitcoin could reach a new all-time high if inflation in the United States as measured by the Consumer Price Index (CPI) slows sufficiently. ” If inflation prints 3.3% or less, Bitcoin should hit a new all-time high” he said in a report published on May 29. Thielen refers to the upcoming release of CPI results by the US Bureau of Labor Statistics (BLS), which is scheduled for June 12.
The CPI for May was 3.4%, down slightly from the previous month. However, this number is still too high to allow Bitcoin to rise significantly. Thielen points out that in the two weeks leading up to the release of the May results, inflows into Bitcoin exchange-traded funds (ETFs) remained strong in anticipation of falling inflation. He also noted that if CPI results are better than expected, momentum could weaken as observed earlier this year.
Since May 13, inflows into Bitcoin ETFs have been positive on a daily basis, with the highest inflow recorded on May 21 at $305.7 million. Thielen believes that Bitcoin price movements are not random, but are primarily influenced by critical factors such as inflation. He adds that several cases this year have shown that higher-than-expected CPI results have led to a drop in the price of Bitcoin. For example, on April 10, the CPI was printed at 3.5%, just 0.1% more than expected, and a few weeks later, the price of Bitcoin fell by 6.67% to $56,000.
CPI Implications for Bitcoin
Markus Thielen explains that price movements are not random, but are mainly influenced by critical factors such as inflation. ” There are no “random” movements in the price of Bitcoin; it all depends on critical factors, chief among which is inflation” he said.
Bitcoin exchange-traded funds (ETFs) launched in January also showed how investors are reacting to economic data. Despite massive inflows of $611 million on the first day, flows eased as CPI results came in higher than expected. Thielen attributes this to better-than-expected CPI results that weakened bitcoin in January and led to a consolidation into March.
If June’s CPI is lower than expected, it could boost investor confidence and fuel a new wave of bitcoin buying. Lower inflation could not only support Bitcoin, but also improve the perception of digital assets as a hedge against inflation.
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A graduate of Sciences Po Toulouse and holder of a blockchain advisor certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.
DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.