Ethereum
Inflation Data Means ‘If You’re Bullish, Buy Bitcoin, Bearish, Sell Ethereum’: 10x Research
This week’s inflation data releases could trigger a few volatile days For Bitcoin (CRYPTO: BTC), according to a new report from 10x Searcha company specializing in institutional research in cryptography.
What happened: “Traders expect an evolution of +/-6% for Bitcoin by the end of this week”, said the author of the report, Markus Thielen.
However, Thielen suggests that significant price variation may not be inevitable.
“Implied volatility is not expensive,” he notes, meaning investors are not anticipating a dramatic move based on inflation numbers.
Technically, Bitcoin is currently hovering around the $60,800 to $61,400 support level. “A break below this level could trigger a price decline,” Thielen warns.
He adds that the average entry price for Bitcoin ETFs sits at around $57,000, so a drop below $60,000 “could cause anxiety for these investors.”
The report highlights a potential correlation between Bitcoin price movements and recent inflation data. “Bitcoin sold off after each of the last two CPI/PPI data points,” observes Thielen.
These sell-offs were about 12-14% each, but were ultimately halted by dovish comments from Federal Reserve Chairman Jerome Powell.
Read also: Wisconsin invests nearly $100 million in BlackRock’s Spot Bitcoin ETF
Why is this important: Although 10x Research’s inflation model predicts a slightly lower CPI reading for Wednesday, it also suggests that inflation will remain elevated for the foreseeable future.
“Wall Street estimates are +0.3% month-on-month and +3.6% year-on-year (up from 3.5% previously),” the report said.
“Our model is two months ahead and it appears that the model has managed to make the right turns over the past year,” Thielen continues.
“However, the data we receive on Wednesday is only a tiny bit lower than the previous month, which is why there is little expectation that Bitcoin will make a significant move up or down based on this number. “
The report downplays the possibility of a major recovery, even if inflation proves weaker than expected.
“We doubt that lower-than-expected inflation could trigger a strong recovery,” they write. Their model suggests that the CPI will remain high for a few more months before falling towards 3%.
“This would imply that Bitcoin could see considerable upside due to lower-than-expected inflation between now and August, with the Fed then returning to verbal confirmation of rate cuts,” the report predicts.
“Therefore, we still expect a significant recovery later in the year. Patience is the key to the game right now.
For the immediate future, the report acknowledges headwinds for Bitcoin. “Market structure still appears to be an obstacle to any Bitcoin rally,” they write.
Additionally, the SEC’s decision on a potential Ethereum (CRYPTO: ETH) ETF next week could further influence market sentiment.
“The best way to trade this week’s inflation data remains: if bullish, buy Bitcoin, bearish, sell Ethereum,” the report concludes.
“This week’s inflation figures probably won’t change anything. We believe Bitcoin could reach $52,000/$55,000 before a more significant rebound occurs.
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Read next: Dutch court sentences Tornado Cash developer to 64 months in prison for money laundering
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