Market Wrap: Bitcoin Falls As Traders Wait For June CPI Inflation Report

Bitcoin was lower on Monday, falling along with most digital assets as traders waited for a major U.S. inflation report to come out early Tuesday.

The largest cryptocurrency by market cap held out above the price support at $ 32,000, with $ 36,400 viewed as an upside target. For the past seven weeks, Bitcoin has mostly stayed in a range between $ 30,000 and $ 40,000.

Current prices

  • S&P 500: 4384.6, + 0.34%
  • Gold: $ 1806.2, -0.25%
  • The 10-year government bond yield closed at 1.369% compared to 1.36% on Friday

“It’s starting to feel like the calm before the storm as there is subdued and calm activity on spot, derivative and on-chain metrics,” blockchain analytics firm Glassnode wrote in a report on Monday.

June US CPI report could rekindle inflation fears

Many cryptocurrency investors see Bitcoin as a potential hedge against inflation, so the June Consumer Price Index release by the US Department of Labor’s Bureau of Labor Statistics should provide an important data point.

The previous month’s report showed a 5% increase in the overall index, the fastest since 2008, driven by higher prices for used cars and trucks.

On average, analysts expect June to hit 4.9%, but any acceleration could rekindle speculation that the Federal Reserve may need to slow down its efforts to stimulate the economy. The US Federal Reserve has nearly doubled its balance sheet to more than $ 8 trillion since early 2020, and money printing has since been seen as a catalyst for Bitcoin’s price gains.

“The benchmark crypto has a solid price foundation considering that we are unlikely to see a reversal in the race for decline,” Bloomberg intelligence analyst Mike McGlone wrote in a report Monday. “For example, when you measure the value of a single currency, the dollar can grow stronger or weaker against a basket of similar legal tender. But it is the entire fiat currency market that is in decline. “

There is speculation that faster inflation in areas where the economy is recovering, such as airfare and accommodation, could spill over to more permanent categories like rentals.

“So far, this has largely not happened, which supports the Fed’s presentation that such inflationary pressures are temporary,” Deutsche Bank analysts wrote in a July 9 report.

Consumers are apparently starting to believe that higher prices may be the new norm: a survey released Monday by the Federal Reserve Bank of New York found that consumers expect, on average, a price increase of 4.8% in the coming year, up from one Expectation of 4% a month earlier.

Of course, there are many different ways of measuring rising consumer prices and the CPI may not provide the truest picture.

CPI 12 month change (US Bureau of Labor Statistics)

Source: US Bureau of Labor Statistics

Crypto markets hit Wall Street in the summer

It’s summer in the northern hemisphere, and that could explain why the cryptocurrency markets have been so sluggish lately.

Glassnode described the Bitcoin market as “impressively calm”.

Trading volume in the largest cryptocurrency is declining, and digital asset firm Eqonex speculates that this could be at least in part because Wall Streeters, who recently got into cryptocurrencies, are taking a hiatus.

According to the company’s daily newsletter on Monday, “2020 and 2021 marked the arrival of financial institutions in the crypto space. We celebrated, we cheered. But we’ve forgotten one thing: the people who work for these financial giants love their summer vacation. “

The corona-related lockdowns last year could play a role. Now that vaccines are introduced and more people can travel and travel, some traders may take the chance to get away – and make up for lost time.

“Bitcoin can trade 24/7/365, but traders cannot,” writes Eqonex. “Especially those with lake houses.”

Bitcoin trading volume

Source: Coindesk

Bitcoin vs. stocks

Bitcoin’s sluggishness comes from the fact that US stocks have climbed back to another all-time high. As 2021 penetrates deeper into the second half, some analysts could start evaluating their track record. Bitcoin’s price is notoriously volatile, so the question naturally arises whether the reward justifies the risk.

The Standard & Poor’s 500 index was led by financial and real estate stocks on Monday, with banks such as JPMorgan and Goldman Sachs to release quarterly earnings starting Tuesday.

“The most important thing people are thinking about right now is the start of the reporting season and the economic releases on the inflation front,” Eric Freedman, chief investment officer of the US Bank Asset Management Group, told Bloomberg News. The yield on 10-year US Treasuries rose 0.01 percentage points to 1.37%.

At one point earlier this year, Bitcoin had doubled from its price in late 2020. But the recent decline in cryptocurrency has reduced earnings to 14% since the start of the year. Such performance lags behind the 17% increase for the S&P 500.

Such track records are vital because, despite frequent admonitions that past performance is no guarantee of future success, many investors invest money in assets that have seen prices rise recently. Fear of missing out was a strong driver for Bitcoin in 2020, but at the moment it doesn’t seem to worry much.

Capital outflow in digital asset investment funds

Digital Asset Investment Funds saw a net outflow of $ 4 million for the week ending July 9, reversing a net inflow of $ 63 million for the previous week. Trading volume in Bitcoin, the largest cryptocurrency, fell to $ 1.58 billion, its lowest level since October 2020.

Crypto funds saw net redemptions last week, reversed from the surge in inflows the previous week.

Source: CoinShares

For the week ending July 9, Bitcoin-focused funds saw a cash outflow of $ 7 million, according to a report by digital asset manager CoinShares. The price of the cryptocurrency has consolidated in a narrow range of $ 32,000 to $ 35,000.

For the past few weeks, North American bitcoin funds have seen steady capital inflows while their European counterparts have continued to experience outflows, indicating “a current geographic divergence in sentiment,” according to CoinShares.

Last week, Ethererum, Binance, and Cardano saw smaller inflows, while the largest inflows, at $ 1.2 million, went to multi-asset mutual funds.

Altcoin summary

  • SNX increase: The price of SNX, the native token of the Decentralized Financial Protocol (DeFi) Synthetix, hit a monthly high of over $ 13 earlier this morning. The DeFi token is up 75% this month while Bitcoin is down 2%. SNX enables market participants to trade Ethereum-based synthetic contracts linked to traditional financial assets, including crude oil, as well as stocks like Apple, Tesla, Facebook, Google, and Coinbase. SNX’s surge to four-week highs comes as the protocol is ready to launch its long-awaited exchange, powered by Optimistic Ethereum, an Ethereum layer 2 scaling solution that aims to increase transaction throughput and lower the fees.
  • Migration of the Power Ledger: Australia-based blockchain company Power Ledger will migrate from Ethereum to Solana in search of greater speed and scalability. The company also cited the lower energy performance of Solana’s Proof-of-History (POH) and Proof-of-Stake (POS) mechanisms in an announcement on Monday.
  • Polygon supports esports tournaments: Polygon is spending $ 10,000 creating a stir for the esports platform Community Gaming. The partnership begins with a summer tournament series sponsored by Polygon. Players of SkyWeaver, a free non-fungible token (NFT) trading card game from Horizon Blockchain Games, will battle for $ 2,500 in MATIC tokens.

Relevant news

Other markets

Most of the digital assets on CoinDesk 20 ended lower on Monday.

Notable Winners as of 9:00 PM UTC (4:00 PM ET):

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