Bitcoin surpasses $28,000 following CPI report as US inflation remains ‘significantly elevated’

Bitcoin (BTC) experienced a slight increase around the opening of Wall Street on May 10 as inflation data from the United States surpassed expectations.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Markets anticipate a pause in June Fed rate hike

Data from Cointelegraph Markets Pro and TradingView indicated that BTC/USD reacted promptly to the April Consumer Price Index (CPI) report, rising 1.7% for the day.

The pair reached local peaks of $28,328 on Bitstamp before stabilizing just above the $28,000 threshold.

The CPI was reported at 4.9% year-on-year, slightly below the anticipated 5.0%. This provided a clear indication that U.S. inflation was continuing to decline, aligning with forecasts from both the Federal Reserve and external analysts.

Headline CPI for April was reported at 4.9% this morning, continuing the trend of disinflation. pic.twitter.com/e5MResLeKC

— Lyn Alden (@LynAldenContact) May 10, 2023

“Fed’s data dependency is starting off well, with strong jobs data and now inflation aligning with expectations… a pause in June seems likely at this point,” financial commentator Tedtalksmacro noted in a Twitter response.

Tedtalksmacro highlighted the influence of CPI and other economic indicators on the Fed’s interest rate strategy, with markets already predicting a halt in rate increases next month.

Fed Chair Jerome Powell has consistently emphasized that such data releases significantly influence policy decisions.

A pause in rate hikes would benefit risk assets, including cryptocurrencies, as easing financial conditions are likely to enhance investor interest in riskier assets.

Data from CME Group’s FedWatch tool revealed that market expectations for a June pause surged from 80% to 90% following the CPI release.

Fed target rate probabilities chart. Source: CME Group

While Bitcoin and altcoins recorded modest increases, investment research platform Game of Trades cautioned that the day’s CPI figures indicated that the U.S. economy was not yet fully recovered.

“The reduction in inflation is primarily driven by the more flexible components of the CPI. The more persistent components remain significantly elevated,” it informed its Twitter followers.

U.S. CPI annotated chart. Source: Game of Trades/Twitter

Bitcoin traders “protecting” crucial trend line

Before the CPI announcement, on-chain analytics platform Material Indicators was analyzing the composition of the Binance order book for potential BTC price insights.

Related: Binance ‘FUD’ meets CPI — 5 things to know in Bitcoin this week

Observing a decrease in volume near the current spot price, it noted that bids were working to maintain the integrity of the 200-week moving average (MA) just above $26,000.

“Keep in mind that liquidity reduces volatility. FireCharts indicates some substantial bid liquidity safeguarding technical support at the 200 Week Moving Average. Currently, the upside has lower volume near the active trading range,” it summarized in part of the day’s commentary.

BTC/USD order book data (Binance). Source: Material Indicators/Twitter

Bitcoin has remained above the 200-week MA since mid-March.

BTC/USD 1-week candle chart (Bitstamp) with 200MA. Source: TradingView

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

This article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making any decisions.