Bitcoin (BTC) dips ahead of potential US inflation increase: Price analysis
Bitcoin (BTC) fell from its new top of $123,200 on Monday and into Tuesday, to currently stand at just under $117,000. Besides the reason of buyer exhaustion, Tuesday will see the new monthly CPI data print, with experts forecasting a 0.3% month on month rise. How will Bitcoin react to this?
Potential uptick in U.S. consumer price inflation?
As predicted by plenty of analysts over recent times, inflation could start to rear its ugly head again in the US. Expected to feed through from the Trump tariffs, an incremental increase in consumer price inflation may be about to make its presence felt.
The new monthly figures will be released at 8:30 a.m. Eastern Time, around 5 hours from now. CPI is expected to increase by 0.3%, while Core CPI is predicted to rise by the same margin. The figures are an increase on the previous 0.1% monthly rise. This translates to 2.6% year on year.
Of course, the actual data may be above or below what is estimated, and this could then cause the U.S. stock market to turn in one direction or the other, with the potential to further affect Bitcoin and the crypto market.
How far down will this correction go?
Source: TradingView
The short-term chart for Bitcoin reveals the current corrective phase. The sharp and sustained rise out of the bull flag could not keep going indefinitely, and so a correction at this point was favourite to happen, and is very healthy for the $BTC price going forward, allowing momentum/overbought indicators to reset.
It now remains to be seen just how far down the price will go. The Fibonacci retracements for this move out of the bull flag, and to the new all-time high, suggest the price could come back to $115,000, or $113,500. The horizontal level of $112,000 coincides with the top of the bull flag and the top of the first pennant after the price first escaped the full flag. The price could also consolidate at its current level, which corresponds to the bottom of the larger pennant.
Whichever of the above options finally comes true, the main thing for investors to consider is that the longer the price stays down in this area, the more time it provides for the bulls to regain their composure ready for the next push to the upside.
Potential for a sharp drop to strong support at $112,000?
Source: TradingView
The daily chart for the $BTC price does contain some concerns. Not least of which is the long candle wick to the upside, left over from the sharp surge to over $123,000 on Monday. This would imply a lot of downside momentum, and so if the price does not recover before going below $116,000, the next stop could be the $112,000 horizontal support level seen in the chart above.
While this potential $11,000 correction might seriously scare investors, if support was found at $112,000, it would likely result in a strong bounce to the upside, founded on what could become strong price structure.
CPI print awaited for bulls or bears to take control
Source: TradingView
The weekly chart shows how the support at $112,000 is also part of a band of support which descends until $109,000. For the bull market to continue, this would probably need to hold firm.
One scenario that could unfold today is if the US CPI print is slightly worse than expected. This might then have the potential to force the price all the way back down to the strong support band. But as already mentioned, a bounce is more likely than not from there. If the CPI release is as expected, or better than expected, the current correction could be reasonably short-lived.
For the more long-term investor, this probably all counts as noise. Bitcoin’s trend is still up, and its bull market is not finished yet.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
