Bitcoin Threatens $25K as U.S. Inflation Subsides

BlackRock Taps into Bitcoin, Launches BTC Private Trust

Bitcoin and U.S. inflation are closely tied together and Wednesday this relationship produced significant moves once again. The yearly inflation rate in the United States dropped to 8.5% from the previous 9.1%, while the predicted reading was 8.7%. The Core version remained unchanged at 5.9% but this was still better than the anticipated increase to 6.1%.

A tight monetary policy (high interest rate) hurts Bitcoin’s price because demand for risky assets drops. On the other hand, a loose monetary policy boosts demand for cryptocurrencies, which are considered high-risk. If inflation subsides, it means that the FOMC will slow down the pace of the rate hikes. Eventually, the hikes will stop, and possibly the Fed will pivot toward cutting the rate.

Wednesday when the inflation numbers came out, Bitcoin soared to a high at $24,228, and one day later it reached $24,921 before trimming some of the gains. It is currently trading at $23,900 and the last closed candle (Daily chart) has a very small body and a long upper wick, indicating indecision and even rejection. This rejection is understandable, considering that BTC/USD came very close to the crucial S/R/ level at $25K.

In other news, investment behemoth BlackRock recently announced the launch of the first spot Bitcoin private trust that will allow U.S. institutional clients to track BTC’s performance. According to BlackRock: “Despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities”.

BlackRock’s new crypto venture will draw fresh eyes to the crypto market, not to mention fresh money, which will have an impact on volatility. A strong inflow of funds can bolster Bitcoin’s price significantly but of course, nothing is set in stone so don’t go running to sell the house.

Chart Analysis – BTC/USD

The pair’s recent price action can be described as an uptrend, at least since mid-June (since the bottom at $17,592). Of course, if we zoom out the chart, the pair is still in a downtrend, so everything depends on the perspective.

What’s a fact is that Bitcoin has been printing higher highs and higher lows, and is now looking to “challenge” the key level at $25,000. When the pair was above the level, it came down with a lot of bearish momentum and broke $25K with ease. On the other hand, currently, the pair lacks momentum, which means that we will probably see some choppy price action around $25K.

It must be noted that the last closed Daily candle shows rejection and that most of the candles are small (no commitment from traders/investors). Also, the MACD lines are close together, further emphasizing the status quo of the market – low momentum.