Bitcoin (BTC) may head into next week’s US inflation report with less support than it had during the last two CPI releases, raising the risk of a pullback toward $70,000.
Key takeaways:
Cleveland Federal Reserve nowcast projects April headline CPI to rise to 3.56% year over year.BTC’s rising wedge pattern could trigger a decline toward $70,000
Fed estimates 0.26% rise in headline inflation
The Cleveland Fed’s latest inflation nowcast estimates April CPI at 3.56% year over year, up from 3.3% in March.
Year-over-year inflation expectations for April and May. Source: Cleveland Fed
It expects monthly CPI at 0.45%, down from 0.9%, while core CPI is projected at 2.56% year over year and 0.21% month over month, compared with 2.6% and 0.2% previously. The official April CPI report is due on May 12.
That keeps the inflation picture mixed. Headline CPI is expected to reaccelerate, even if the monthly pace slows and core inflation stays mostly stable.
For risk assets, that is not an ideal setup. A firmer annual CPI reading can still reinforce the view that the Fed has little room to cut rates quickly, which tends to pressure speculative trades such as Bitcoin.
Target rate probabilities for the December Fed meeting. Source: CME
Nonetheless, Bitcoin has avoided deeper declines despite the recent hot CPI prints.
For instance, BTC price rallied by over 15% after the March CPI report showed headline inflation rising to 3.3% from 2.4% in February.
One reason is that institutional buyers absorbed more than 500% of the newly mined Bitcoin supply, with Strategy accounting for a large share of that buying.
BTC/USD daily chart vs. institutional buying market cap. Source: Capriole Investments
That support looks weaker now. Strategy has paused its BTC purchases, while its STRC preferred stock continues to trade below its $100 par value.
When STRC trades below par, issuing new shares becomes less efficient, limiting Strategy’s ability to raise fresh capital for more Bitcoin buys.
Strategy’s weekly Bitcoin buying estimates. Source: STRC.LIVE
That weakening support may leave Bitcoin more exposed to a different CPI reaction pattern this…
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