Analysis and Predictions
The Bitcoin (BTC) price is witnessing a notable end-of-week relief rally following the release of economic data indicating a decline in inflationary pressures in the US throughout December 2023.
Figures from the US Core PCE Price Index reveal a year-on-year inflation rate of 2.9%, surpassing expectations of 3.0%. As a result, Bitcoin's price has surged by over 5% in the past 24 hours, reaching the $42,000 mark according to CoinMarketCap.
The Core PCE Price Index serves as the preferred measure by the US Federal Reserve for evaluating underlying price pressures in the country. The decrease in inflation potentially paves the way for future Fed rate cuts in the coming year.
Lower interest rates, a consequence of Fed rate cuts, create a more favorable liquidity environment that historically supports crypto prices. This could explain the upward trajectory of Bitcoin since the US market opened on Friday.
Looking at the market sentiment, the CME's Fed Watch tool indicates a probability of just under 50% for potential Fed rate cuts as early as March. Despite this, traditional asset markets, such as the US Dollar Index (DXY) and the 10-year yield, remain relatively stable, suggesting that macro traders are not significantly adjusting their Fed rate cut expectations.
The surge in Bitcoin's price may also be influenced by positive trends in US stock prices. The S&P 500 has reached record levels above 4,900, indicating a positive risk appetite in equity markets that could spill over into the crypto space.
Noteworthy is the slowdown in Grayscale's sales of BTC from its GBTC ETF, potentially contributing to the positive momentum. As institutional interest in crypto continues to grow, newly launched ETFs, including BlackRock's iShares Bitcoin Trust (IBIT), attract substantial flows, surpassing $2 billion in assets under management.
Despite the recent rebound, Bitcoin remains around 15% below its recent highs. Breaking above key moving averages, particularly the 21 and 50DMAs near $43,000, is crucial for signaling a decisive bullish trend. A sustained break above these levels could set the stage for a retest of yearly highs around $49,000.
Looking ahead, focus will shift to the upcoming Bitcoin halving and potential Fed rate cuts, both historically significant catalysts for Bitcoin's long-term bullish trajectory. Analysts anticipate a possible retest of all-time highs at $69,000 in 2024.
