Bitcoin price has rallied by over 20% since the weekend amid heightened contagion concerns stemming from the collapse of the Silicon Valley Bank. In reaction to the crisis, analysts expect the Federal Reserve to pause on its interest rate hikes. Aside from the risk appetite, the US CPI data will offer cues on the crypto’s probable direction in the short term.
BTC/USD rally’s sustainability
Bitcoin price rallying in recent sessions is largely founded on the mood in the market. Indeed, the crypto fear & greed index, which is one of the key measures of emotions in the sector, is at a greed level of 56 as at the time of writing. After exuding fear in recent months, it got to a neutral level a few weeks ago. Even so, traders should be keen not to jump on the bull run at an inappropriate time.
More particularly, it’s important to watch for how the US CPI numbers come out and what that will mean to the crypto industry. Analysts expect consumer prices to have risen by 6.0% in February; a lower pace than January’s 6.4% on a year-on-year basis. With the exclusion of the volatile food and energy components, the forecast is that the core CPI remained unchanged at 0.4% MoM.
Higher-than-expected CPI numbers will likely set a bearish environment for bitcoin price. This is founded on the thesis that high inflation figures will warrant further interest rate hikes by the Federal Reserve.
As recent as last week, investors forecast a rate hike of 50 basis points during the Fed meeting scheduled for next week. Granted, analysts now expect the central bank to pause on the increases in March before approving a 0.25% hike in the subsequent meetings. Howeever, if the inflation data signal additional hikes, bitcoin price will likely record a pullback in the short term.
Bitcoin price prediction
A look at its daily chart shows BTC/USD trading above the 50 and 200-day EMAs following the recent rallying. As at the time of writing, the crypto was up by 0.75% at 24,400.08.
Notably, the US CPI data will determine if bitcoin price will break past the crucial resistance level of 25,000 to rally further towards its next target at around 26,500.
However, higher than expected inflation figures will leave the aforementioned resistance zone solid for a while longer. If that happens, the bears may have an opportunity to yield a pullback to the support level of 22,795 or lower. Even so, I expect 21,000 to be a steady support zone in the short term.