Key day arrives for the price of bitcoin and the cryptocurrency market
Demand for bitcoin (BTC) and cryptocurrencies, as well as major stock market stocks, has slowed slightly this week as a key day for markets approaches. This Friday, May 31, the United States personal consumption expenditure (PCE) price index will be published.
The PCE measures the annual change in the prices of consumed goods and services such as food, clothing, medical services, and housing. In this way, it offers a broader analysis than the consumer price index (CPI), which is based on a series of specific areas. Therefore, it works as the inflation indicator preferred by the Federal Reserve (Fed) to guide monetary policy.
Given the proximity of this data, The price of bitcoin has shown, with a decline, less buying force. The price fell from 71,000 to 67,000 dollars (USD) since last week, after the momentum that triggered the approval of exchange-traded funds (ETFs) of the Ethereum cryptocurrency, reported by CriptoNoticias.
However, despite the decline, bitcoin currently maintains a 12% increase so far in May, as the graph shows. Such performance currently exhibits a pause in the bullish trend which may be influenced by the wait for data that reflects a decrease in inflation.
“If the US PCE comes out in line with expectations on Friday, we will see another significant upward push,” said Colombian analyst Juan Rodríguez. Last month, this index was 2.7%, 0.1% higher than expected, which led to falls in the markets.
The forecast for the imminent PCE announcement is that it will remain at the same figure as the previous one, according to data shown below. Therefore, analysts like Juan Rodríguez predict that, if this number or a lower one is published, it is bullish for the market.
Rodríguez warns that the reaction will be reflected in the flows of bitcoin ETFs, which traditional and institutional investors flock to. In any case, he predicts that, even in the face of a result that leads the markets downward, BTC will recover the upward trend in the medium term, driven by the support that the industry is gaining this year, including from Donald Trump in his political campaign. .
Higher-than-expected PCE could push bitcoin lower
“PCE should be at the center of investors’ minds,” says Brian Levitt, global market strategist at Invesco, an asset management company that issues a bitcoin ETF. “This is a market that has been very focused on inflation, very focused on what the Federal Reserve is going to do, at least in short periods,” he warns.
The Invesco manager explains that, Faced with higher-than-expected inflation, markets begin to deal with political uncertainty. In a scenario like that, “you get some volatility and some pullback,” she clarifies when it comes to prices in the short term.
The reason behind it is that Higher inflation heightens expectations that the Fed will not lower interest rates in 2024. As seen below, these have remained at 5.5% for almost a year, the highest level in two decades.
Such a monetary situation discourages the demand for risk assets, something that also usually happens during the summer of the northern hemisphere, which runs from June to September. That is why the result of the indicator this last week of May becomes relevant.
In addition, The PCE data will give indications of the consumer price index (IPC) to be published in two weeks that could also impact the markets. “If inflation prints 3.3% or less, bitcoin should reach a new all-time high,” says Markus Thielen, head of research at the analysis firm 10x Research, about this metric.
A figure like this for the CPI would mean a slowdown in annual inflation compared to the 3.4% result recorded last month. In this sense, eyes are now resting on the PCE to see if there are bullish signs for the future of bitcoin and the markets.
