This week’s inflation data releases could trigger a volatile few days for Bitcoin BTC/USD, according to a new report by 10x Research, a firm specializing in institutional crypto research.
What Happened: “Traders expect a +/-6% move for Bitcoin by the end of this week,” says the report’s author, Markus Thielen.
However, Thielen suggests a significant price swing may not be inevitable.
“Implied volatility is not expensive,” he notes, meaning investors aren’t pricing in a dramatic move based on inflation figures.
Technically, Bitcoin is currently hovering around the $60,800 to $61,400 support level. “A break below this level could trigger lower prices,” warns Thielen.
He adds that the average entry price for Bitcoin ETFs sits at around $57,000, so a drop below $60,000 “could cause anxiety for those investors.”
The report highlights a potential correlation between Bitcoin price movements and recent inflation data. “Bitcoin sold off after each of the last two CPI/PPI data points,” Thielen observes.
These sell-offs were around 12-14% each, but ultimately halted by dovish comments from Federal Reserve Chair Jerome Powell.
Also Read: Wisconsin Invests Nearly $100M In BlackRock’s Spot Bitcoin ETF
Why It Matters: While 10x Research’s inflation model predicts a slightly lower CPI number for Wednesday, it also suggests inflation will remain elevated in the near future.
“Wall Street estimates are at +0.3% MoM and +3.6% YoY (vs. 3.5% previously),” the report states.
“Our model leads by two months, and it appears that the model got the turning points right in the past year,” Thielen continues.
“However, the data point we are receiving on Wednesday is only a tiny bit lower than the previous month, which is why there are shallow expectations that Bitcoin would make a significant move up or down based on this number.”
The report downplays the possibility of a major rally even if inflation comes in lower than expected.
“We doubt that lower-than-expected inflation would set off a big rally,” they write. Their model suggests CPI will stay high for a few more months before dipping towards 3%.
“This would imply that Bitcoin could make a sizeable up-move on the back of lower-than-expected inflation by August, with the Fed then shifting back to verbally confirming rate cuts,” the report predicts.
“Hence, we are still expecting a meaningful rally later in the year. Patience is the name of the game right now.”
In the immediate future, the report acknowledges headwinds for Bitcoin. “The market structure still appears to be a roadblock for any Bitcoin rally,” they write.
Additionally, the SEC’s decision on a potential Ethereum ETH/USD ETF next week could further influence market sentiment.
“The best way to trade this week’s inflation data remains: if you are bullish, buy Bitcoin, bearish, short Ethereum,” concludes the report.
“This week’s inflation print will likely not change this. We believe Bitcoin might see $52,000/$55,000 before a more meaningful rebound occurs.”
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