Bitcoin has kicked-off the week on the front foot, dragging most major altcoins higher and catching up with the stock markets’ latest rally, despite the recent decoupling between digital assets and the major US indices. Nevertheless, the king of cryptocurrencies had an extended record-breaking losing streak, recording nine consecutive weekly losses, while it is currently trading more than 50% beneath its all-time high. Therefore, even if some positive signs have emerged after the bulls managed to recapture the $30,000 psychological level, the road back to complete recovery appears to be long and bumpy.
Inflation remains the name of the game
Last Friday, the April US PCE inflation reading hit the markets, with the annual figure falling from 6.6% to 6.3% in line with analysts’ projections. This development reinforced the view that inflationary pressures have likely peaked in the US, which in turn boosted investors’ bets that the Fed might eventually slow down its monetary tightening, paving the way for the recent relief rally in stock markets. Nonetheless, Bitcoin and the broader crypto space continued to head down, exhibiting signs that their strong positive correlation with equity markets has broken up.
Unexpectedly, at the beginning of this week, most major crypto assets have been edging higher, mirroring the stocks’ recent rebound and indicating that their positive relation has partially returned.
Barrage of positive developments
The recent relief rally in equity markets has entrained cryptocurrencies higher, but it is not the sole factor. Firstly, China’s easing of Covid-19-related curbs has eased investors’ fears over a potential recession, increasing their appetite for risky assets. Moreover, the broader crypto space is getting a boost from the recent weakness observed in the US dollar, which is heading towards its first monthly loss in five months as markets project a shallower monetary path for the Fed.
Can the price break above its sideways pattern?
Bitcoin price has been trading within a tight range during the past two weeks, with investors scrutinizing the current complex market conditions, and appearing to be on hold for fresh catalysts that could provide strong directional impetus.
In the positive scenario, bullish actions could send the price to test the recent peak of $31,570 before the attention shifts to the $34,450 barrier.
On the flipside, should selling interest intensify, Bitcoin’s price may descend towards $28,000, which is the lower boundary of its recent rangebound pattern. A violation of the latter could set the stage for the 2022 low of $25,390.
Overall, even though a raft of tailwinds has emerged for cryptocurrencies, their future is closely tied to the pace and magnitude of central banks’ monetary tightening. Therefore, in the upcoming week, the Eurozone CPI print may be a substantial driver for investors’ risk tolerance as it could provide insights into how hard the ECB will slam the brakes on the Eurozone economy.
