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CPI Data Flat In May — BTC Price Spikes 5% But Will it Continue Past $72,000 Resistance?

Last Updated June 12, 2024 2:16 PM
Nikola Lazic
Last Updated June 12, 2024 2:16 PM

Key Takeaways

  • Bitcoin ETFs see major outflows ahead of CPI
  • CPI unchanged below expectations.
  • BTC $70,000 resistance is pivotal point

The market was anticipating significant macroeconomic updates, including the Consumer Price Index (CPI) and the Federal Reserve’s interest rate decision. The conclusion of the two-day Federal Open Market Committee (FOMC) meeting on Wednesday was followed by significant Bitcoin ETF Outflows, and uncertainty loomed over the market. 

Bitcoin’s price is struggling to cross $70,000, falling to $66,000, its lowest point today. However, since the CPI data was released and showed no change in May, it spiked to $70.000. However, BTC has been trading below $72,000 since May 21. In light of new information, can it finally cross the $72,000 resistance? 

Bitcoin ETF Outflow Continued 

The US spot Bitcoin ETF market experienced substantial outflows for a second consecutive day, totaling $200 million on Tuesday, June 11. This followed $65 million in outflows the previous Monday, which ended a 19-day inflow streak. The Bitcoin price declined notably during these outflows, influenced by the anticipation of forthcoming macroeconomic reports.

BTC
BTC ETF Netflow | Source: sosovalue.xyz

Data from SoSoValue  indicated that Grayscale led the outflows on June 11, with $120 million exiting, contributing to $18 billion in outflows since the introduction of spot Bitcoin ETFs in January. 

Other notable outflows included $56.5 million in ARK Invest’s ARKB, $11.7 million in Bitwise’s BITB, $7.4 million in Fidelity’s FBTC, and $3.8 million in VanEck’s HODL. BlackRock’s IBIT saw no new flows. The ongoing outflows and upcoming economic reports are expected to be crucial for the market’s direction.

CPI Unchanged in May

Today’s data reveals that the U.S. consumer price index (CPI) remained unchanged in May, indicating a slight easing of inflationary pressures, according to the Labor Department’s latest report. While the CPI, which measures the average change over time in the prices paid by urban consumers for a basket of goods and services, showed no increase for the month, it still rose by 3.3% compared to the previous year. This figure was slightly below the 0.1% monthly increase and 3.4% annual rate expected by economists surveyed by Dow Jones.

CPI
CPI Data | Source: U.S. Bureau of Labor Statistics via FRED

Core CPI, which excludes the more volatile categories of food and energy, saw a modest increase of 0.2% for the month and 3.4% annually, also underperforming relative to economists’ expectations of 0.3% and 3.5%, respectively. 

The report further highlighted a significant 0.4% monthly rise in shelter costs, contributing to a 5.4% increase from the previous year. Energy price reductions of 2% and minimal food price increases helped temper overall inflation. Gas prices decreased by 3.6%, and motor vehicle insurance costs slightly declined by 0.1% despite a sharp 20% annual increase.

This inflation data arrives at a critical time as the Federal Reserve concludes its two-day policy meeting. Markets anticipate the central bank maintaining interest rates between 5.25% and 5.5%. 

Based on ongoing economic indicators, the Federal Open Market Committee (FOMC) is expected to possibly lower its earlier projections of three rate cuts this year to fewer. While CPI is not the primary measure used by the Fed, which prefers the personal consumption expenditures price index, it still plays a significant role in their economic assessments and future monetary policy decisions.

Bitcoin Spikes 5% But Can It Continue? 

Since reaching a peak of nearly $74,000, Bitcoin has been experiencing a downtrend within a descending channel. On May 17, it broke out of this channel, reaching $72,000 on May 21, but has since slipped back under $70,000 after facing resistance again.

BTC
BTCUSD | Credit: Nikola Lazic/Tradingview

 

The upward trend starting on May 1 might signal the start of a significant rally, potentially setting a new all-time high. For this to occur, Bitcoin must decisively break above the horizontal resistance and maintain it as support above $72,000. 

This would initiate the fourth wave in a five-wave pattern. Its completion could propel Bitcoin beyond the $78,000 mark however, an alternative scenario could be presented. The rise from May could be a second sub-wave or a larger three-wave correction. 

In that case, we could see a more significant downturn leading to lower values than May 1. Bitcoin is now testing its broken ascending support for resistance, and the result of this interaction will provide further insight into its future outlook. 

If Bitcoin goes past $70,000, it will likely advance higher than $72,000 and validate the bullish scenario. But if it gets rejected, a bearish outlook would look more likely. 

Disclaimer
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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