Bitcoin’s Triumph of $30K Proves a Tricky Card as Market Buckles Up for Macro Headwinds

Bitcoin pulled a somewhat surprising post-Easter maneuver, shooting from $28,100 on Monday afternoon to $30,300 in less than 12 hours. The BTC price course on the 1H-candle chart shows that barely any effort was needed to knock down the hurdle at $29,100. These early gains drove the BTC/USD pair (at the peak of the market action) to its highest level since last June, simultaneously unlocking a year-to-date and ten-month high.

Ethereum, on the other hand, traded as high as $1,930 but has since joined altcoins trading down on the day. Meanwhile, Solana (SOL) has stood out as the only top 10 tokens still in the green, with dwindling gains of 5.30% in the last 24 hours.

Price action so far

Bitcoin and most of the altcoins rallying behind it caught their breath for the better part of Tuesday before faltering briefly in early European hours on Wednesday. The niche leader even slipped briefly below the newly-found height of $30K. Nonetheless, BTC price has since regained the mark and was last spotted clinging onto $30,200 ahead of the second half of a week bearing influential macro headwinds.

Here’s what’s around the corner:

Wednesday’s CPI print

Sticky inflation concerns have once again come to the fore this week. Projections of the next path of interest rate adjustment have shifted this month in anticipation of the end of an aggressive rate hike streak lasting almost a dozen months now. Though investors have continued raising their bets that the US Federal Reserve will soon cease its hawkish stance, a significant portion of the market still firmly believes that at least one interest-rate hike adjustment is due. The CPI figures for March released on Wednesday came in at 5% annually and 0.1% month-on-month, the latter beating market forecasts of 0.3%.

“The all-items index increased 5.0 percent for the 12 months ending March; this was the smallest 12-month increase since the period ending May 2021,” the U.S. Bureau of Labor Statistics press release detailed.

The monthly basis index reading, which represents a retreat from the 0.4% increase in February, adds to the conviction that the Federal Reserve (Fed) may pause rate hikes at next month’s FOMC meeting.

Moderately strong US inflation data

The latest CPI report has ticked down the probability of the Fed delivering a 25-basis point rate hike in three weeks. CME Group’s FedWatch Tool depicts a 67% chance of a hike at the upcoming Federal Open Market Committee (FOMC) meeting in early May.

Commentators view Wednesday’s data as an indicator that the Fed could consider pausing its tightening spree or even reverse course in the best-case scenario by cutting rates.

Latest CPI data brings pivoting into the picture

The official jobs report from the US Bureau of Labor Statistics released last Friday contrasted the earlier data, which indicated that US job postings in February had dropped to their lowest level in over two years. This mixed employment situation summary brought even more focus ahead of Wednesday’s inflation figures.

I think the CPI is really important, could be the difference in us getting 1 more rate hike or we stop at the next FOMC with the final 25 BP bump,” one trader wrote.

Last month’s chaotic events in the banking industry occasioned turbulence across the wider financial market. The crypto sector took a slight beating on the back of these developments but has since bounced back decently so far in April. In light of this and the growing murmur around the slowdown of the US economy, investors hang onto hopes that the central bank might consider halting its monetary tightening campaign.

Interest rate forecasts

Wednesday’s CPI report barely delivered clarity on the Federal Reserve’s strategy to bring the economy under control. Inflation has tracked a descending course since June 2022. Analysts earlier this week opined that a negative reading could spook panic and catalyze a market-wide repricing as it would have suggested March’s banking upset is yet to abate, at least from the Federal Reserve’s point of view.

“The chance for a 25 BP rate hike for the May 3rd FOMC meeting now stands at 71.2% after the latest jobs report. The labor market is still a thorn in the side for the FED but it’s also what keeps the US economy out of recession. The key is balance,” one observed noted.

Later today, FOMC minutes are expected today and could provide insight into future Fed action. The focus here is on the language and introduction of new or contradictory information. Later, the March Producer Price Index (PPI) and Consumer sentiment as well as retail sales data will preoccupy investor minds on Thursday and Friday respectively.

Market Watch

Liquidations

Feelings over BTC price action have shifted on both ends as the macro enters the picture. Monday’s unexpected upswing saw roughly $230 million worth of traders’ crypto orders closed between Monday and Tuesday. Shorts bets accounted for 76% of the liquidated volume. The latest dip on Wednesday morning has turned the picture upside down. More than $125 million has been liquidated – a significant contribution of 67.17% from longs.

Market action shows that participants have retained positive sentiment on the prospects of the digital asset market, notwithstanding low volumes. Still, pro traders have shown skepticism, exercising caution amid optimism on possible price advancement towards higher grounds.

Bitcoin volatility and dominance

Monday’s northward price ascent ended a 12-day streak of extremely low volatility in which Bitcoin lulled around $28,200. Speculators on the sidelines await concrete signs of the prevailing period of suppressed prices coming to an end.

On one hand, Bitcoin’s exploits at $30,000 could solidify the shifting investors’ perception of the asset. Year-to-date returns corroborate the evolution from a risk market proxy to an asset that could do well in the phases of economic pressure and weak growth in traditional markets. Bitcoin is floating 82% higher than its price at the start of the year.

Bitcoin dominance has in the past usually grown as crypto prices decrease. However, this trend has been turned around in the last two months. This anticyclical run is directly attributable to last month’s banking issues in the US and Europe.  Bitcoin’s market capital with respect to the total global figure is up to 48.60% – the highest the ratio has been since May 2021.

For context, Bitcoin’s dominance stood at 38% at the start of the year. Meanwhile, more Bitcoin holders are showing HODLing tendencies, with on-chain data indicating that over 53% of the mined BTC supply has not been moved in more than two years. Blockchain data analytics platform Glassnode made the observation this week that the supply dormant for more than 24 months stands at 53.14%. This ratio of the volume of coins in circulation with respect to the total supply has historically been a yardstick for overall liquidity.

Liquidity claims

As holders ponder over a near-term correction or breakout, some observers contend that the price’s modest rally to $30,000 has decimated liquidity. Low liquidity typically breeds environments vulnerable to ma developments and other significant niche events. Being the case, changes in the economic sit. could leave Bitcoin exposed to even more volatile moves. There is a slight consolation that Bitcoin has proved its resilience, moving up 82% this year compared to the S&P 500 and NASDAQ indices, which are up 7.65% and 15.89%, respectively.

Fund inflows and institutional investors

CoinShares reported in its weekly flows review that digital asset investment products saw inflows totaling $57 million last week – Bitcoin accounting for 98% of this volume. The inflow change pushed flows back to a net inflow position year-to-date. Separately, an optimistic cautious approach has been reflected in the market as the demand for leverage longs has remained modest. While Bitcoin futures premiums have appeared to pick up, market data shows buyers are not tapping on excessive leverage.

This initial decoupling run is especially promising as it portrays investors’ growing belief in crypto markets benefiting from higher inflationary pressure. Bitcoin proponents, including ex-MicroStrategy CEO Michael Saylor, welcomed Bitcoin’s return to $30K. Saylor, who moved on to an executive chairman capacity, has been central to the business intelligence firm’s exposure to the asset.  Earlier this month, the Virginia-headquartered firm revealed it had bought an additional 1045 BTC bringing its crypto treasury size to 140,000 coins acquired at an average price of just over $29,000.

The reclamation of $30,000 has brought the company’s investment bet in profit for the first time since June. MicroStrategy’s investment strategy, the largest corporate treasury of any public company, isn’t the only corporate BTC bet to move into green. FinTech conglomerate Block (formerly Square) has racked up 8,027 BTC, spending approximately $220 million. Even with the correction, the stash is in profit. Only a price mark above $35,000 would bring Tesla’s bag of 9,720 BTC into profit on paper.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

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