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Breaking News: LINK Price Climbs Following Chainlink's Deal With US Commerce Department, Eyes $30
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Breaking News: LINK Price Climbs Following Chainlink's Deal With US Commerce Department, Eyes $30

Bitcoin Drops Below $17,000 Pre-CPI And FOMC – Scenarios To Prepare For This Week

Jake Simmons
Jake Simmons
1 year ago
3 mins read
Bitcoin BTC

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A week could not be more important for Bitcoin and the broader crypto market! On Tuesday, at 08:30 ET, there will be the release of the Consumer Price Index (CPI).

Just one day later, on Wednesday, December 14 at 14:00 ET, the Federal Open Market Committee (FOMC) will hold its last meeting of the year. For the fourth time this year, there will be an updated forecast for inflation and interest rates (dot plot).

Generally, there is a simple base case scenario: if the numbers are better than expected, there will be a rally for risk-on assets like Bitcoin. If the CPI falls short of expectations, Bitcoin could face a new bear market low.

Did Bitcoin Overreact To The PPI?

To assess how likely both scenarios are, it is also worth looking back at the recent producer price index (PPI) release. The PPI was higher than expected.

However, expectations were relatively high. The core PPI was forecast at 7.2% in October, but actually fell to 6.7%, a 0.5% month-to-month decline.

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The core PPI November forecast was 5.9%. In reality, though, the PPI came in at 6.2%. While this looks bearish at first, it really wasn’t. This still represented a 0.5% decline month-over-month.

The PPI shows the same story. The value fell for two consecutive months, 0.5% and 0.6%. The expectation was a 1.1% decline in one month, which was extremely unrealistic.

The markets’ projected target was an extremely low number, and the failure to meet that expectation was, in a sense, an overreaction. Inflation has continued to fall significantly, just less than less than expected.

Ultimately, expectations were a bit out of touch with reality. In addition, the PPI is fundamentally more volatile than the CPI, and also fluctuates seasonally. With the Christmas and gift-giving season, fluctuation is not uncommon.

A Game Of Expectations

So what are the expectations for the CPI? CPI fell 0.5% in October to 7.7%, while 8.0% was predicted. Tuesday’s expectations are now 0.4% lower. The forecasted CPI is 7.3%.

Core CPI is expected at 6.1%, which would represent a 0.2% decline. The October reading was 6.3%, while the expectation was 6.5%, creating a positive surprise.

The forecast for the CPI and the Core CPI are thus much more moderate and less unrealistic than for the PPI. Unlike the PPI, there are no extremely high expectations.

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Even a “small” surprise could be enough to turn the market bullish. In a best-case scenario, we see a number of around 7% for the CPI on Tuesday.

Moreover, a renewed drop in the CPI could confirm that inflation peaked. If the CPI falls for the sixth month in a row, fears of a second wave of inflation would also be allayed for now.

All Eyes On The FOMC Meeting

Last but not least, the CPI numbers will be quite crucial for the FOMC decision on Wednesday. The market has priced in a 78% probability that the Fed will slow the pace of rate hikes to 50 basis points at that meeting.

However, the words spoken at the FOMC press conference are likely to be even more important, as well as the forecasts of updated economic projections.

For the first time since September, the market will see an updated dot plot, an extremely important piece of information, as NewsBTC reported.

Banking giant ING, meanwhile, laid out some potential scenarios that could put the market in risk-off or on mode. ING’s base case is that the Federal Reserve will hike rates by 50 bps, with 5% end 2023.

As the monetary policy works with long & varied lags, ING expects a slowdown in future rate hikes, and clear cuts in 2024. This scenario could provide the bulls with the powder they need to start a rally.

ING FOMC Meeting predictions for risk on assets like Bitcoin
ING scenarios for December 14 FOMC meeting. Source: Twitter

At press time, the Bitcoin price dropped to $16,920 in Monday morning trading in Asia.

Bitcoin BTC USD 2022-12-12
BTC price, 4-hour chart. Source: TradingView
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Jake Simmons
Jake Simmons

Jake Simmons

Jake Simmons, a dedicated crypto journalist, has been passionate about Bitcoin since 2016 when he first learned about it. Through his extensive work with NewsBTC.com and Bitcoinist.com, Jake has become a trusted voice in the crypto community, guiding newcomers and seasoned enthusiasts alike towards a deeper understanding of this dynamic field.

Read more

His mission is simple yet profound: to demystify Bitcoin and cryptocurrencies and make them accessible to everyone.
With a professional career in the Bitcoin and crypto scene that began right after graduating with a degree in Information Systems in 2017, Jake has immersed himself in the industry. Jake joined the NewsBTC Group in late 2022. His educational background provides him with the technical prowess and analytical skills necessary to dissect complex topics and present them in an understandable format. Whether you are a casual reader curious about Bitcoin or an investor seeking to navigate the latest market trends, Jake’s insights offer valuable perspectives that bridge the gap between complex technology and everyday usage.

Jake is not just a reporter on technological trends; he is a firm believer in the transformative potential of Bitcoin over traditional fiat currencies. To him, the current financial system is on the brink of chaos, propelled by unchecked government actions and flawed Keynesian economic policies. Drawing from the principles of the Austrian school of economics, Jake views Bitcoin not merely as a digital asset but as a crucial step towards rectifying a failing monetary system. His libertarian views reinforce his stance that just as the church was separated from the state, so too should money be freed from governmental control.

For Jake, Bitcoin represents more than just an investment; it's a peaceful revolution. He envisions a future where Bitcoin fosters a sustainable and responsible financial framework for generations to come. His advocacy is not about opposition but about evolution, about laying the groundwork for a system that prioritizes transparency and equity over secrecy and inequality.

As a journalist, Jake’s articles are crafted with the precision of a scholar and the passion of a true believer. He provides not only news but also thoughtful analysis that connects the dots between daily developments and larger economic theories. His work is a beacon for those lost in the technical jargon often associated with crypto discussions, illuminating the practical implications and benefits of these technologies.

In summary, Jake Simmons is not just reporting on a revolution; he wants to be part of it, fully committed to enhancing public understanding and adoption of Bitcoin and cryptocurrencies. His work is more than just a collection of articles; it’s a resource, a guide, and a companion for anyone ready to explore the potential of this digital frontier. Whether you are taking your first steps into crypto or are a veteran looking to stay on top of the latest trends, Jake’s insights provide clarity and foresight in an often unpredictable industry. Join him on this journey to reshape the world of finance, one post at a time.

You can engage with his latest takes on Twitter: @realJakeSimmons.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
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