Bitcoin got off to a solid start to the week as bulls sent the BTC price to its highest weekly close in 10 months. After a relatively quiet week, last-minute volatility is getting traders excited at the prospect of attacking the $30,000 resistance again. However, there are many obstacles in front of them. Alongside the US March Consumer Price Index (CPI) data, new information on the FED’s policy will be announced on April 12. When the Ethereum upgrade is added to this, one wonders how Bitcoin will react. In addition, it is a matter of curiosity how macroeconomic data will affect the precious metals market and gold. Here are the notable developments on a weekly basis…
CPI data is important for BTC and gold
In the macro calendar of the week, a familiar event takes the lead with the US CPI data for March. The data, this time to be released on April 12, has traditionally been accompanied by increased volatility in risk assets, making this date a key area to watch for “fake exits” in crypto markets. The Fed will also release the minutes of the last FOMC meeting, where it chose to continue raising interest rates. Therefore, the environment is somewhat complex when it comes to the impact of CPI on asset performance. While investors want to see inflation decline faster than expected, the Fed itself remains hawkish and confirmed last month that further rate hikes may be appropriate.
However, the divergence between the Fed and the markets is equally evident, and there has been an atmosphere showing that the Fed does not believe that rate hikes will continue for longer. According to CME Group’s FedWatch tool, next month’s FOMC meeting will likely result in a 0.25 percent increase again. These rates are highly flexible and respond instantly to any new macro data release, including the CPI. According to macroeconomics and stock market analyst James Choi, there is another side to the inflation story that also includes the US dollar for crypto.
Choi warned on April 10 that this week’s announcement would put the dollar’s strength into a three-month free fall and pave the way for potential relief on risk assets. “People seem to have no idea how DXY is going to drop in the next 3 months,” he commented on a US Dollar Index (DXY) chart first shared in late 2022. Others, including Jim Bianco, head of macro analysis firm Bianco Research, see Q1 bank earnings as a source of potential knee-jerk market reactions. In part of a comment he made on Twitter, Bianco predicted that earnings would be “larger than CPI.”
Bitcoin price volatility increases: Gold correlation rises
The data shows that if volatility is what traders want, they probably already have plenty of it. According to market data source Kaiko, Bitcoin is taking a different path from stocks when it comes to volatility, adding to the volatility as the Nasdaq cools. The events of the past month, which focused on the banking crisis in the USA, were enough to push the “gap” between Bitcoin and the Nasdaq’s 30-day volatility to the highest levels in the past year. Meanwhile, Bitcoin’s correlation with gold is currently higher than the S&P 500, as Kaiko revealed last week. So, this may indicate that Bitcoin is seen as a “safe-haven asset” like gold.
At this point, if the appetite for risky assets will increase as stated above after the CPI, the value of Bitcoin and gold may decrease. If the correlation between BTC and gold is resolved, we may see a decline in the price of gold while BTC rises as a risk asset. Either way, we’ll see what happens in the coming days. Kaiko added that Bitcoin’s inverse correlation with the US dollar is also rapidly being resolved. “Although BTC’s negative correlation with the US dollar remains, the correlation is now almost non-existent,” a section of the comment posted on Twitter over the weekend read.
BTC price hits 10-month high at weekly close
According to the data, Bitcoin took a late surprise at its April 9 weekly close, with BTC/USD posting some last-minute gains, closing candles just above $28,300 on Bitstamp. This is impressive in itself, which marks ten-month highs on weekly closes as the bears are not allowed to continually return to lower levels. “Bitcoin still holds the lower support area and is still following the path,” wrote Michaël van de Poppe, founder and CEO of trading firm Eight, as part of his latest analysis.
At the time of the close, BTC/USD managed to hit local highs of $28,540 before returning to consolidate below the closing level. Van de Poppe remains optimistic about short-term prospects. “Bitcoin has consolidated at support and is running towards $28,500. Another test of $28,600-29,000 and we will likely have a significant breakout,” he continued. “More importantly; then confidence in the markets will come back so you will see more altcoins start to debut,” he said.
Popular trader and analyst Rekt Capital, in its own assessment of long-term market power, described Bitcoin as “very well positioned” for further gains. However, it remains conservative when it comes to price action so far in 2023, noting the continued potential for BTC/USD to form a “double top” structure and return towards its annual open.
Ethereum Shanghai upgrade approaching
BTC could see an internal source of friction this week as Ethereum prepares for the Shanghai hard fork, as the dominance of the Bitcoin market is reshaped. Analysts are classically divided on how intense the resulting sell-side pressure might be. Some views argue that there will be little incentive for owners to exit the market. “For those looking to ‘sell the news’ after the Shanghai upgrade, it will take about 1+ year for staked ETH to fully unlock, on a first come first serve basis,” The Modern Investor summarized on Twitter.
ETH/USD has recently hit its highest levels since August, attempting to retrace $2,000, while ETH/BTC is struggling to break out of ten-month lows.
Greed dominates the market
Although crypto market sentiment is at its most “greedy” level since BTC/USD all-time high in November 2021, some encouraging signals are coming from hodlers. These came from research firm Santiment, which noted an ongoing trend reflecting hodler action earlier this year as Bitcoin headed into unknown price territory over the weekend. In Q1 2021, the “greed” in the crypto market was much more intense, and the Crypto Fear and Greed Index spent most of its time near its maximums.
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