The rally of Bitcoin continues after inflation figures came out, showing that new data indicate a decrease in prices at significant levels, thus leading to a short-term increase in momentum. The same situation occurred last year, which led to an increase of 40% during July and August.
Inflation Report Surprises Analysts
The most recent figures presented by Benjamin Cowen on his channel tell a story of inflation easing to 3.5%, down from 4.2% and well ahead of what analysts had expected. Even the core rate has come in at 2.6%, contrary to the 2.8-2.9% that was forecasted.
Such an unanticipated decline is enough to put some optimism back into the crypto markets, Bitcoin in particular. Pointing to the numbers, Cowen noted that there have been meaningful drops across the board in the inflation index, with housing (some two-thirds of the total), transportation, and medical services all contributing. For risk assets like Bitcoin, this kind of broad-based improvement in the data is viewed as a good sign.
Historical Parallels and Potential Outcomes
Benjamin Cowen has drawn a parallel to last year’s market, where a June easing of inflation was instrumental in establishing a floor for Bitcoin. That was followed by a 40% run-up into August. But Cowen is quick to add that one should not expect the same kind of staying power from those post-inflation rallies; as it happened, the price ran into resistance and gave back its gains by the end of August.
At present, the cryptocurrency is confined to a narrow band, hemmed in by bear market resistance on one side and the 200-week moving average on the other. According to Cowen, the technicals are such that a breakout or breakdown will be forced in the months ahead, with the outcome hinging on the direction of macroeconomic conditions.
Energy Prices and Further Considerations
The drop in oil prices is yet another element behind Bitcoin’s recent run-up. Cowen points out that as energy costs come down, they put further pressure on inflation to subside, a dynamic that has been good for Bitcoin and similar assets in the past. Then again, he cautions that a sudden spike in oil would make for a more difficult picture when it comes to digital assets and inflation alike.
There is an eye on both energy and inflation across the market; investors are still mindful of the volatility from last year. For his part, Cowen notes that even if cooler inflation figures prompt a rally in Bitcoin, what happens over the coming months will be dictated by a host of macroeconomic considerations if the asset is to see any lasting growth.
Source — Benjamin Cowen: https://www.youtube.com/watch?v=rWfLRMiyQVY