Bitcoin Sets $37,000 Target Following Slowed US Inflation: Market Responds Amid Thin Liquidity
Summary:
Bitcoin's value targets $37,000 as October Consumer Price Index in the US reveals a slowed inflation rate, a shift from the previous month where inflation largely overshot market expectations. While stock market responds positively, Bitcoin's response to the CPI data is relatively modest. Market liquidity remains thin as whale activity on exchanges decreases and retail investors increase Bitcoin exposure. Analysts note that price corrections, such as Bitcoin's recent 4.5% drop from 18-month highs, contribute to market health and are a typical part of financial cycles.
On Nov. 14, Bitcoin (BTC) set its sights on the $37,000 mark as the most recent inflation data from the United States fell short of predictions. BTC prices saw a resurgence as the October Consumer Price Index (CPI) revealed a decelerating inflation rate, data from Cointelegraph Markets Pro and TradingView indicates. The CPI was 0.1% less than market projections on both a yearly and monthly basis, with the year-on-year change standing at 3.2%, contrasted to the 4.0% core CPI.
The U.S. Bureau of Labor Statistics validated in an official news feed, "The complete items index grew 3.2 percent in the 12 months culminating in October, a smaller advance when compared to the 3.7-percent increase for the 12-month period ending in September. The comprehensive items minus food and energy index escalated 4.0 percent in the previous year, indicating the smallest yearly change since September 2021."
This marked a significant difference from the prior month where the CPI was seemingly the only inflation indicator to exceed the consensus of the market. Stocks responded positively immediately after the Wall Street open, and S&P 500 saw a 1.5% hike.
Despite consistently expressing his skepticism about the Fed's policies in the current inflationary scenario, financial commentator The Kobeissi Letter regarded the data positively, remarking, "Inflation appears to resume its DESCENT, despite exceeding 3% for the 31st month in a row."
Nonetheless, Bitcoin responded modestly to the latest CPI releases revisiting an intraday low before advancing to $37,000, whilst remaining within a certain range. On-chain monitoring source Material Indicators pointed out that the market liquidity is generally low, which is a key factor for managing volatility. They reported on low whale activity on exchanges, and an increased BTC exposure by retail investors. They noted that rising liquidity in active trading zones results in major slippage for large orders, thereby forcing smaller buyers to step in for support over $36k.
Despite a 4% drop from the 18-month highs of earlier in the month, BTC price actions continue to impress market players who believe such a pullback within a broader trend is expected, if not necessary. Research and data analyst at CryptoSlate, James Van Straten, noted, “Bitcoin already down 4.5% from the highs; bull market corrections are normal and healthy,” adding that drawdowns of up to 20% may occur due to profit-taking or liquidations.
Van Straten highlighted CryptoSlate’s Nov. 13 analysis proposing that BTC price corrections may continue to be deeper, given the 120% year-to-date increase in BTC/USD. He stressed the importance of acknowledging that market corrections bolster the overall market health. Co-founder of DecenTrader, Filbfilb, similarly predicted a significant drawdown for Bitcoin before the April 2024 block subsidy halving event in an interview with Cointelegraph.
Published At
11/14/2023 3:13:45 PM
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