Inflation curbs Bitcoin rally : What’s next for crypto ?

As Bitcoin seemed to be heading towards $75,000, the latest U.S. economic data abruptly interrupted this ascent. Faced with unchanged personal consumption expenditures (PCE) inflation and significant underlying inflation, hopes for a monetary easing by the Federal Reserve are dwindling, plunging investors into doubt. This tense macroeconomic context, coupled with the cautious reactions of institutional actors, exacerbates the pressure on long positions and amplifies price volatility.

Bitcoin Declines in Response to U.S. Economic Data

While the Bitcoin stagnated around $72,000 on October 31, 2024, the latest U.S. data on personal consumption expenditures (PCE) failed to revitalize the market. Indeed, this data leaves it in a retreating dynamic. The September report shows that personal consumption expenditures inflation, the Fed’s preferred indicator for tracking inflation, fell to 2.1 %, in line with expectations. In contrast, core inflation (Core PCE) remained unchanged at 2.7 %, slightly above the 2.6 % forecast.

It is worth noting that it has now been six months since core inflation has not declined, raising concerns about the effectiveness of the Fed’s tightening policy. Such a situation has prompted the trading resource The Kobeissi Letter to react. “The Fed rate cut has once again been delayed,” it stated on X. Thus, the market had hoped for a sign of easing from the Fed’s policies, but this expectation was thwarted by persistently high indicators. The PCE rate, closely watched by investors for its implications on the Fed’s decisions, has only reinforced the idea of strict monetary policy in the immediate term.

Meanwhile, the probability of a pause in rate hikes at the Fed’s meeting on November 7 has consolidated to 96 %, leaving little room for adjustments favorable to risk assets like Bitcoin. This context has put the crypto market in a waiting mode, with increasing pressure on long positions. For investors, it is the U.S. jobs report on November 1 that could bring the next wave of volatility for BTC, reminding us that macroeconomic risks still influence the asset’s trajectory.

The Market Actors’ Reaction and Implications for Bitcoin

In light of this discouraging economic situation, the “whales” and other institutional investors have quickly adjusted their positions. Market order data shows a marked decrease in the exposure of large BTC holders, indicating increased caution in the face of economic uncertainties. Over $500 million in open interest has already disappeared with only a 2 % price drop. This reduction in open interest, combined with whale behaviors, reflects a loss of confidence in Bitcoin’s ability to sustainably surpass the $70,000 threshold in this context.

With the monthly close approaching, Bitcoin is nearing its key resistance level, having risen over 13 % in October. However, volatility seems to be intensifying in the coming days, making price movements difficult to predict. The influence of the Fed, combined with the cautious behaviors of major players, hardly suggests an immediate surge.

In summary, macroeconomic pressure and the heightened caution of influential actors create a conducive environment for increasing volatility. Upcoming events, particularly economic releases and Fed decisions, will be crucial to assess whether Bitcoin can truly reach or even sustainably maintain the $70,000 mark.