US Inflation Data Hints at Rate Cut, Bitcoin Market Remains CautiousFinancial markets rose broadly in early trading Tuesday, after the release of US July Producer Price Index (PPI) data showed cooling inflation, offering further room for the Federal Reserve to cut interest rates.PPI Data Hints at Potential Rate CutThe US Labor Department reported that the PPI rose 0
US Inflation Data Hints at Rate Cut, Bitcoin Market Remains Cautious
Financial markets rose broadly in early trading Tuesday, after the release of US July Producer Price Index (PPI) data showed cooling inflation, offering further room for the Federal Reserve to cut interest rates.
PPI Data Hints at Potential Rate Cut
The US Labor Department reported that the PPI rose 0.1% month-over-month in July, lower than economists' expectations, and increased 2.2% year-over-year, slightly above the Fed's 2% inflation target. The data suggests inflation pressures are easing, providing more justification for the Fed to consider rate cuts at upcoming policy meetings.
SecureDigitalMarkets analysts commented that the PPI report showing lower-than-expected wholesale inflation in July could pave the way for the Fed to consider lowering interest rates.
Investors are now looking to Wednesday's release of the Consumer Price Index (CPI) data, hoping it will further confirm that inflation is steadily declining, strengthening the case for a rate cut in September. The CME's FedWatch tool shows a 100% probability of a cut in September, with the point of debate currently being whether the cut will be 25 basis points or 50 basis points.
Bitcoin Market Cautiously Awaits Catalyst, Rangebound Trading
While the PPI data offered positive signals for both the stock and crypto markets, Bitcoin remained relatively unresponsive to the report. SecureDigitalMarkets noted that Bitcoin is currently range-bound between $58,000 and $60,000, lacking a clear trend.
Previously, Bitcoin's rally from $58,000 to the 61.8% Fibonacci retracement level seemed like a perfect setup for a breakout. However, Bitcoin currently appears to be stuck in a range, waiting for a new catalyst to ignite market momentum.
Analysts point out that altcoins are performing mixed, with some showing strong gains while others lag behind. The recent bullish momentum seen in the Nasdaq index could potentially drive a new rally in Bitcoin.
Exchange Stablecoin Ratio Rises, Indicating Easing Sell Pressure
SecureDigitalMarkets noted that the exchange stablecoin ratio is rising, a positive signal. This ratio compares the amount of Bitcoin on centralized exchange wallets to stablecoins. This indicator has fallen to its lowest point since February 2023, suggesting that sell pressure on Bitcoin has eased, as fewer traders are converting their held Bitcoin to stablecoins.
Market Sentiment Remains Cautious, Potential for Downside in Bitcoin
Despite the positive signs, FxPro Senior Market Analyst AlexKupcsikevich believes that Bitcoin and the broader cryptocurrency market are not out of the woods yet, due to a significant increase in selling activity.
He noted that while crypto prices are averaging higher than the previous day, a clear uptrend has not emerged. The market sentiment index stands at 31 (fear), higher than the previous day's 25. Bitcoin's failure to break through the $60,000 level and the sell-off after attempts to break above the 50-day and 200-day moving averages in the latter part of last week indicate that sellers are in control of the market.
Kupcsikevich believes that despite market sentiment moving out of the extreme fear zone, the daily RSI index has exited the oversold area and has lost steam to move higher. In such an environment, Bitcoin could fall by $5,000 instead of rising by the same amount.
He warns that a significant drop in crypto could signal a new bout of momentum pressure for the stock market, which is still recovering from its August 5 low.
Summary
While the US PPI data offers a signal for potential rate cuts, the Bitcoin market remains cautious in response, currently trading in a sideways range. The rising exchange stablecoin ratio suggests easing sell pressure, but market sentiment remains apprehensive. Analysts warn of potential downside risks for Bitcoin, with a significant drop in the crypto market potentially putting renewed pressure on the stock market.
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