Bitcoin price rose above $22,000 for the first time in over three weeks as traders remain optimistic about the Merge; viewing its current level as a buying opportunity. Even so, it will likely pull back with the US inflation data in focus. Signs that the Fed’s ultra-hawkish stance will continue may have BTC/USD drop to around $21,200. On the flip side, a decline in the US CPI may push the crypto higher to $22,500.
What’s driving the market?
Bitcoin price extended last week’s gains; rising past $22,000 for the first time since 19th August. The gains are largely founded on the easing of the US dollar and subsequent appetite of cryptocurrencies and other risk assets.On Monday, the dollar index dropped further from the 20-year high it hit in the past week at $110.78. As at the time of writing, it was at $107.91.
Even so, BTC/USD rallying will likely cool in the short term as traders await the US inflation data that is due for release on Tuesday. While Bitcoin price is in the green in Monday’s session, the crypto fear & greed index points to probable decline in the ensuing sessions.
The index, which tracks the key emotion in the market, is at an extreme fear level of 25 compared to the previous session’s fear level of 26. Notably, cryptocurrencies have remained on this end of the spectrum for months now amid an environment of high interest rates.
What to expect in the new week
A look at the crypto fear and greed index points to traders’ main focus in the new week – US inflation data. The CPI figures are set to offer further cues on the Fed’s next move during its September meeting next week. Investors expect the central bank to approve a rate increase of 75 basis points; the third super-size hike in a row.
Even so, a decline in consumer prices may have the market pricing in a lower rate increase in subsequent Fed meetings. Economists expect a CPI reading of 8.5% YoY. This would be a further easing of consumer prices after June’s 40-year high of 9.1%.
The Merge is also another event that is set to impact bitcoin price movements in the new week. Just like the US inflation data, the upgrade on Ethereum blockchain is bound to yield heightened volatility in the crypto market. Overall, traders are optimistic about the upgrade. Indeed, the bullish outlook explains why dips in BTC/USD have been embraced as buying opportunities thus boosting the digital ASSET. However, hitches in the upgrade may weigh on bitcoin price.