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Bitcoin CPI inflation

Matrixport Report: Here’s What Happens To Bitcoin If Inflation Continues To Fall

Best Owie by Best Owie
4 weeks ago
in Bitcoin News
Reading Time: 3 mins read

As Bitcoin became a more mainstream asset, its correlation with the stock market rose which meant it has been impacted by world events to a higher degree than it did before. This is evident with the asset’s reaction to the rising inflation and the Fed’s continuous hiking of interest rates.

However, there seems to be a reversal in this trend as inflation is starting to ease. This means the Fed could change its stance on interest rates soon. If this happens, what does it mean for Bitcoin?

Looking Toward The CPI Data Release

In the Matrixport Daily Insights report released on Tuesday, Head of Research Markus Thielen outlines a bullish case for Bitcoin as inflation slows down. He starts out by explaining the expectation that inflation is going to fall further which would be a good thing for risk assets such as BTC.

Related Reading: PEPE Market Cap Crosses $1 Billion As Gemini Listing Rumors Spread

The inflation Matrixport forecast for the year 2023 puts it below 2% before year’s end, which would be an over 50% reduction. Such low CPIs would no doubt see the Fed reverse interest rates, dropping them significantly. In fact, the report projects interest rate cuts of up to 100 bps.

“Hedge Funds remain massively hedged equities. The CFTC data for S&P500 positions is equivalent to levels only seen during the 2008 financial crisis and the European Debt crisis in 2011,” the report said. “While this does not necessarily mean that Hedge Funds are short, it indicates that hedge funds have sold those contracts and will have to cover them at some point. This buying will squeeze prices higher.”

Matrixport bitcoin report

Matrixport predicts sub-2% inflation by end of year | Source: Matrixport

If inflation were to fall as low as predicted, then the price of BTC would rally toward the $40,000 level before the end of 2023.

As for the current Bitcoin price and how to play the market, the report further adds that “A stop loss of $27,000(-3%) could offer great risk/reward with the macro data being released soon,” pointing to the CPI data being released on Wednesday, May 10.

Bitcoin Sellers Hold Market Hostage Ahead Of CPI Release

With less than one day left to the CPI data release for May, Bitcoin sellers are currently dominating the market. As a result, the digital asset fell to the mid-$27,000 level where it currently trending. This is also understandable as investors tend to move their holdings into stables leading up to important events like this as it can trigger high volatility in the market.

Related Reading: PEPE, WOJAK, TURBO Take A Nosedive As Meme Coin Euphoria Dies Down

This decline in price has driven BTC below its 20-day simple moving average (SMA) and puts it dangerously close to its 50-day moving average. If the digital asset were to fall below the latter, it could be disastrous as it would solidify the bears’ hold on the market, further driving down the price.

Bitcoin price chart from TradingView.com

BTC price returns to mid-$27,000 | Source: BTCUSD on TradingView.com

Further downside from here could see BTC return to $26,000 where the next significant support level lies. Thus, it is important that the CPI data comes out with a lower inflation rate and the Fed moves from hawkish to dovish. Otherwise, risk assets such as BTC and the total cryptocurrency market could see a rapid decline.

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet… Featured image from iStock, chart from TradingView.com
Tags: bitcoinbtcbtcusdBTCUSDTCPIinflation
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Best Owie

Best Owie

Best Owie is a seasoned managing editor with a wealth of experience currently serving as the Managing Editor at NewsBTC. Best is a highly skilled professional with a track record of producing engaging and informative content. With a keen eye for detail and a passion for accuracy, Best is committed to ensuring that each article published meets the highest standards of quality. Best has over six years of experience in the crypto industry and has overseen the creation and publishing of thousands of articles over the years. When not curating engaging content, Best can be found reading a book with a cup of hot chocolate, enjoying a Netflix series, or exploring the outdoors. Best is a true professional in every sense of the word with an exceptional dedication to producing high-quality work.

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