Bitcoin was lower Monday, falling along with most digital assets, as traders awaited a key U.S. inflation report due out early Tuesday.
The largest cryptocurrency by market capitalization was holding above price support at $32,000, with $36,400 seen as the upside target. For the past seven weeks bitcoin has mostly stayed in a range between $30,000 and $40,000.
- S&P 500: 4384.6, +0.34%
- Gold: $1806.2, -0.25%
- 10-year Treasury yield closed at 1.369%, compared with 1.36% on Friday
“It is starting to feel like the calm before the storm as muted and quiet activity appears across spot, derivative and on-chain metrics,” the blockchain analysis firm Glassnode wrote Monday in a report.
U.S. CPI report for June could rekindle inflation fears
Many cryptocurrency investors see bitcoin as a potential hedge against inflation, so the release Tuesday of the June consumer price index reading by the U.S. Labor Department’s Bureau of Labor Statistics should provide a key data point.
The prior month’s report showed a 5% jump in the all-items index, the fastest since 2008, driven by higher prices for used cars and trucks.
On average, analysts expect a 4.9% reading for June, but any acceleration might rekindle speculation the Federal Reserve might need to slow its efforts to stimulate the economy. The U.S. central bank has nearly doubled the size of its balance sheet since early 2020 to more than $8 trillion, and the money-printing is seen as a catalyst for bitcoin’s price gains since then.
“The benchmark crypto has a solid price foundation, considering it’s unlikely we’ll see a reversal in the race to debase,” Bloomberg Intelligence analyst Mike McGlone wrote Monday in a report. “When measuring the value of an individual currency, the dollar, for example, may be strengthening or weakening versus a basket of like legal tender. Yet, it’s the entire fiat-currency market that’s declining.”
There’s some speculation that faster inflation in areas where the economy is reheating, such as airfares and lodging, might spread to enduring categories like rents.
“As of yet, this has largely not happened, supporting the Fed’s narrative that such inflationary pressures are transitory,” Deutsche Bank analysts wrote in a July 9 report.
Consumers are apparently starting to believe higher prices might be the new norm: A survey released Monday by the Federal Reserve Bank of New York found consumers, on average, expect prices to rise 4.8% over the coming year, up from a 4% expectation a month earlier.
Of course, it goes without saying there are a lot of different ways to measure rising consumer prices, and the CPI might not provide the truest picture.
Crypto markets meet Wall Street summer
It’s summer in the Northern Hemisphere, and that might be one explanation for why cryptocurrency markets have been so listless of late.