Bitcoin climbs above $21,000 on cooling US inflation

The Federal Reserve is on track to downshift to smaller interest-rate increases after the further cooling in prices, though it’s likely to keep hiking until pressures show more definitive signs of slowing. That’s helped boost risk assets like the Nasdaq 100 stock index, which has gained for six straight days.

“Cryptoassets performed well after the soft CPI print, suggesting that crypto’s correlation to macro is not going away any time soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “This week’s follow-through in price action is certainly encouraging,” and barring any forced liquidations from troubled crypto company DCG, “there is a high probability that the absolute bottom is in for crypto prices”.

The price of bitcoin was stuck in a narrow range around $16,000 to $17,000 for weeks before the latest breakout. The upward moves have caught shorts by surprise — crypto short liquidations have topped $100m in five of the past six days, according to data from Coinglass. Saturday’s total was the highest, topping $449m.

Katie Stockton, co-founder of Fairlead Strategies, offered a caution about the rally, which has taken bitcoin above its 200-day moving average for the first time in a year.

“Deeply overbought short-term readings challenge positive momentum, so we would not chase the rally at these levels,” she said in a note Friday. She sees resistance near $21,500, where there’s a 61% Fibonacci retracement level. 

Still, the upward trajectory could inject even further optimism into a market that’s been struggling to find good news in recent months.

“Declining CPI coupled with the announcement that the FTX liquidators have recovered $5bn in liquid assets have given crypto markets plenty of factors to forget the macro picture, which is still bearish,” said Hayden Hughes, CEO of social-trading platform Alpha Impact. “Markets have plenty of positive momentum heading into the next FOMC meeting later this month.”

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