Will Bitcoin Price Keep Pumping To $20,000? Watch This Now

The Bitcoin price hit a three-month high at $19,104 yesterday. After the Consumer Price Index (CPI) for December 2022 was announced at 6.5% as expected, the market initially reacted cautiously and showed a pullback to below $17,900. Nonetheless, the bulls took over after that and posted the largest every day candle in over 6 months.

Nonetheless, caution is suggested. Investors should ask themselves if this can be a bull trap or really the start of a brand new bull run. To evaluate this, experts are currently recommending various data points.

The Fed Rules It All

With December CPI data being within the books, the main focus turns to February 1, when the Fed’s next FOMC meeting is scheduled to happen. And in accordance with the FEDWatch tool, experts’ projections are exceedingly bullish. A whopping 94% expect the Fed to proceed to reduce its rate hike pace and only add 25 bps.

Goal rate probabilities for February 1 | Source: CME Group

On that note, Carl Quintanilla, a journalist for CNBC and NBC News, points to a Fundstrat Global Advisors evaluation that “a whopping 59% of CPI components are actually in outright deflation, a leap of 800bp in a single month… the bond market got it right. Inflation is undershooting the Fed and consensus view.”

As well as, Fundstrat points to the newest Atlanta Fed wage tracker. Yr-over-year, the reading fell to five.5% in December, the bottom level since January 2022, which the financial firm says is one other data point confirming that wage inflation has slowed sharply in recent months. Due to this fact, Fundstrat concludes:

We predict investors will increasingly come to the conclusion the Fed can declare ‘mission achieved’ on inflation. And that is organising 2023 to be the alternative of 2022, where inflation expectations fall faster than EPS risk.

Even the Fed’s “mouthpiece”, chief economics correspondent of Wall Street Journal Nick Timiraos tweeted yesterday that December’s consumer price index is prone to keep the Fed on the right track to cut back the speed hike to 1 / 4 of a percentage point.

Timiraos also quoted James Bullard, president of the St. Louis Fed, who said that each one things considered, it will be higher to get to the utmost rate as soon as possible. But he also added, “in macroeconomic terms, whether that’s done at one meeting or one other might be not as vital.” Until then, Bitcoin investors can track more data points.

Bitcoin Price Going North? Watch This

Arguably, crucial indicator is perhaps the U.S. Dollar Index (DXY). It’s well-known that Bitcoin’s price movements are strongly inversely correlated with the DXY. When the DXY is rising, Bitcoin is trending down. When the DXY falls, BTC shows a rally.

This was the case yesterday because the DXY continued to fall while Bitcoin posted strong gains. Nonetheless, the DXY is in a historically vital support zone.

On this respect, it stays to be seen whether risk assets like Bitcoin run right into a bull trap or whether the DXY falls below 101 within the weekly chart and turns support into resistance. If yes, BTC is greater than prone to rally.

DXY, weekly chart | Source: DXY on TradingView.com

Alistair Milne, CIO of the Altana Digital Currency Fund, also identified one other crucial data point in Bitcoin’s weekly chart, sharing the chart below:

[Bitcoin] price showing huge divergence from increasing relative strength. When the weekly RSI goes oversold, it has previously a historic opportunity before a big move, signalling the tip of the bear. Look what happened Oct/Nov 2015 and Mar/Apr 2019.