Bitcoin
Numbers turning into golden bitcoin sign. Blockchain concept. 3D illustration

The Bitcoin price is in a tight range as investors wait for a key US inflation figure set for Thursday this week. The BTC is trading at $36,600, which is in the same range it has been in the past few trading sessions. It has a market capitalization of more than $679 billion.

US inflation data ahead

Inflation is an important economic data that measures the change of prices of items. It is also a part of the Federal Reserve’s dual role, with the second one being stable unemployment. 

On Friday, we received the relatively strong US unemployment rate. The data revealed that the overall unemployment rate declined from 6.1% to 5.8% in May. This was the lowest it has been since the pandemic started.

However, accompanying data showed that the economy added less than 600k jobs in May, which was lower than the median estimate of more than 700k. Interestingly, data by ADP published on Wednesday showed that the economy added more than 900k jobs

The Bitcoin price will next react to the latest US inflation data that will come out on Thursday. The data is expected to show that the overall consumer price index (CPI) rose by 4.7% in May while the core CPI rose by a year-on-year rate of 3.2%. If analysts are accurate, this will be the fastest inflation growth in decades. 

Therefore, these numbers are important for Bitcoin because of the Fed, which has encouraged investments in risky assets by leaving interest rates low. It has also continued to print billions of dollars every month through what is known as quantitative easing. 

Bitcoin and inflation

In a previous article, I wrote about the relationship between Bitcoin and inflation. The idea is that high inflation at a time when the labor market is tightening will push the Federal Reserve to start tightening. 

In theory, if the Fed tightens, risky assets like cryptocurrencies and growth stocks will underperform as investors move to safer and higher-yielding assets like value stocks.

However, recent statements by Fed officials have been relatively dovish. The members have argued that the current strong numbers are transitory and that they will normalize as the country reopens. 

Still, if the upcoming inflation numbers are strong and as other central banks like the RBNZ and BOC turn hawkish, the Fed could be under pressure to move. Indeed, Janet Yellen, the Treasury Secretary and former Fed Chair made a case for higher rates during the weekend. She said:

“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view. We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade.”

Bitcoin price prediction

Bitcoin Price
Bitcoin price chart

Turning to the four-hour chart, we see that the BTC price has been in a consolidation mode in the past few days. The chart shows that the coin has made a symmetrical triangle pattern slightly below the 23.6% retracement data. Now, with this triangle nearing its level of convergence, we can’t rule out a breakout in the near term. The question is on the direction of this breakout. 

Since this is a symmetrical triangle, I suspect that the BTC will break out in either direction. Still, since this triangle comes after a major dip, we can’t rule out a bearish breakout since it now resembles a bearish pennant pattern.

1 comment
  1. Very sound analysis Crispus, even if it goes against your bearish prediction….well that’s the market. Your logic is nonetheless with a solid foundation as always.

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