Bitcoin (BTC) experienced a notable dip below $80,000 on Thursday, amid disappointing U.S. producer inflation data that exceeded market expectations. However, the leading cryptocurrency has since rebounded, currently trading near $82,000.
According to the Bureau of Labor Statistics, the September Producer Price Index (PPI) rose by 1.3% from August, marking the largest monthly increase since March 2022. This surge in producer inflation has raised concerns among traders and investors alike, contributing to a momentary drop in Bitcoin’s price.
The annual PPI reached 6.3%, significantly surpassing the 5.3% forecast, while core PPI, which excludes volatile food and energy prices, climbed to 5%, exceeding an anticipated 4.4%. The previous day, the consumer price index indicated inflation at 3.7%, adding to the market’s anxiety.
Energy prices played a pivotal role in driving the recent producer inflation spike, with over 80% of the increase attributed to energy costs. Energy prices surged by 10.8%, while gasoline prices skyrocketed by 20.3%. Meanwhile, service prices saw a more modest increase of 0.8% in September.
In light of the inflation data, CME FedWatch is suggesting a 34% chance of a quarter-point rate hike during the upcoming Federal Reserve meeting on October 27-28. Despite the inflation figures, Treasury yields have surprisingly declined, as analysts suggest that market focus has shifted away from macroeconomic data to concerns over the federal deficit.
Bitcoin’s initial response to the PPI and CPI data was a sharp decline of approximately 3.6% within 24 hours, liquidating over $800 million in long positions. However, the crypto market displayed resilience, with Bitcoin bouncing back to around $82,000 shortly thereafter, leading to the liquidation of $50 million in short positions in just one hour.
Analysts are now closely monitoring key support levels for Bitcoin. Ted Pillows noted that the price movement from $79,700 to $82,300 was largely driven by short squeezes rather than strong spot buying. He emphasized that a daily close above $81,200 is crucial, and a breakout above $83,700 with significant spot buying would strengthen the bullish sentiment.
Rekt Capital also pointed out that Bitcoin may retest the 21-week and 50-week exponential moving averages (EMAs) at $76,144 and $78,459, respectively, which could help to sustain its bullish trend. This scenario is not uncommon in early-stage bull markets, he noted.
In a similar vein, Aksel Kibar remarked that last week’s close near $83,700 lacked sufficient strength for a breakout and identified $75,000 as a critical level that would invalidate the current pattern.
The latest TradingView chart reveals that Bitcoin fell to its lowest point since September 18 before making its recovery. Currently, Bitcoin remains in the $82,000 range, albeit still below the crucial support zone between $82,500 and $82,800. The immediate level to watch is $82,800, which could indicate further bullish momentum if surpassed.
As Bitcoin continues to navigate through the murky waters of inflationary pressures and market volatility, traders are reminded of the cryptocurrency’s inherent resilience and potential for recovery.
