- The CPI reached 3.1%, causing a price drop for Bitcoin.
- If interest rates remain unchanged in March, BTC could fall back below $50,000.
The consumer price index (CPI) published on February 13 did not go down well for Bitcoin [BTC]. Before the report was released, participants had expected the CPI to be 2.9%. But AMBCrypto discovers that the Bureau of Labor Statistics has set the benchmark at 3.1%.
A higher-than-expected result meant that nominal interest rates were higher, making it difficult for investors to view BTC as an urgent store of value. For those not used to it: the CPI is a measure of the total price level in an economy.
When it falls, it means that consumer prices generally fall and the market can gain more liquidity.
The store of value can wait
However, a high CPI indicates a price increase. Therefore, investors may not consider buying cryptocurrencies as an emergency decision.
After the report, Bitcoin’s price fell from $50,000. This decline could be linked to the possibility that some market players have made profits because they would need more money for ‘real life’ activities.
Despite the decline, AMBCrypto noted that participants remained hopeful that BTC’s short-term potential could remain bullish.
One metric that explains this is the Short Term Holder-Net Unrealized Profit/Loss (STH-NUPL). This statistic only considers UTXOs under 155 days old and serves as a indicator to assess the behavior of short-term investors.
Source: Glassnode
The chart above shows that Bitcoin holders have put capitulation behind them (red). There was also great hope (orange) that the price would improve. Should this continue, investor behavior could shift towards optimism (yellow).
March can make or break BTC
Another important meeting that could influence the price of Bitcoin in the future is the FOMC. The FOMC stands for Federal Open Market Committee. It is a division of the US Federal Reserve that focuses on setting monetary policy by managing open market conditions.
A few weeks ago, AMBCrypto reported how Fed Chairman Jerome Powell predicted that the Fed might not cut rates in March. A more recent development, driven by the CME Group, has found that the probability of interest rates staying the same has increased to 92%.
The derivatives market too noted that the chance of an interest rate cut was 62.1%. If the FOMC decides to cut interest rates in March, Bitcoin’s price could soar higher. But if rates remain unchanged, the value may decline or consolidate.
In the meantime, on-chain data from Santiment showed BTC nearing a return to $50,000. The message stated that the disappointing CPI outcome had traders panicking. But now market participants took positions for further climb.
📊 #Bitcoin approaching a new cross back above $50K, climbing back to $49.8K after the panic drop following yesterday’s disappointing results #CPI report. Traders who carefully position their portfolios with the right combination of #altcoins still benefit if
(Continued) 👇 pic.twitter.com/s6t4UGZ01r
— Santiment (@santimentfeed) February 14, 2024
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If Bitcoin regains $50,000, the major altcoins could also recover. Should this be the case, BTC could attempt to test $55,000 while a widespread altcoin rally could begin.