Bitcoin Stumbles at $61,000: Inflation Pressure and Silk Road Bitcoin Sale Risk CombineBitcoin (BTC) failed to break through the $61,000 mark in early trading on Thursday, weighed down by a double whammy of rising inflation and the looming sale of thousands of Silk Road bitcoins, which has put heavy pressure on the cryptocurrency market.The September Consumer Price Index (CPI) report revealed inflation running hotter than economists expected, climbing 0
Bitcoin Stumbles at $61,000: Inflation Pressure and Silk Road Bitcoin Sale Risk Combine
Bitcoin (BTC) failed to break through the $61,000 mark in early trading on Thursday, weighed down by a double whammy of rising inflation and the looming sale of thousands of Silk Road bitcoins, which has put heavy pressure on the cryptocurrency market.
The September Consumer Price Index (CPI) report revealed inflation running hotter than economists expected, climbing 0.2% month-over-month versus expectations of 0.1%. The metric also came in higher than expected, rising 2.4% year-over-year, compared to projected gains of 2.3%. Core CPI also beat expectations, with the index that excludes volatile food and energy costs rising 0.3% in September versus expectations of 0.2% and 3.3% year-over-year, compared to projections of 3.2%. Despite the higher-than-anticipated CPI, it was only slightly above economists' forecasts, meaning the implications for a November rate cut are minimal. The CME FedWatch tool shows the likelihood of the Fed keeping rates steady sits at 13%, down from 19% yesterday, while the probability of a 25 basis point rate cut stands at 87%.
Data from TradingView shows Bitcoin rallied to a high of $61,277 before the CPI release but reversed course after the results were announced, retesting the $60,400 support level. The bulls have struggled to establish a sustained rally in recent days as the threat of another large-scale sale by the U.S. government has put pressure on the market. The U.S. Supreme Court declined to hear a case involving the ownership of 69,370 bitcoins, worth $4.38 billion, seized from the Silk Road dark web marketplace and currently held by the Department of Justice. BattleBornInvestments requested review, claiming it acquired rights to the seized bitcoins through the bankruptcy estate. The company previously failed to convince a lower court, as well as an appeals court, in 2022 that it acquired the bitcoin through a bankruptcy claim following Silk Road's closure in 2013. A federal appeals judge in San Francisco dismissed the case last year, ruling that the companys claims to the BTC were invalid. The Supreme Courts refusal to hear the case opens the door for the government to sell the bitcoins, which could lead to prolonged weakness and price declines, similar to what occurred in July when the German government sold 50,000 bitcoins on the open market.
"The upcoming sale of 69,370 bitcoin related to Silk Road by the United States government has the potential to create some short-term and long-term impacts on the crypto market and bitcoin price," said Ryan Lee, lead analyst at BitgetResearch, in a report. In the short term, Lee cautioned that increased market volatility is expected, and investors face psychological pressures. "Such large-scale bitcoin sales often trigger market fluctuations," he said. "Especially if sold all at once or in a short period of time, market sentiment could be negatively impacted by the sudden increase in supply, leading to a wave of selling and a temporary drop in bitcoin price." He added, "Some investors may worry that the influx of these bitcoins could put downward pressure on prices, particularly if sold on the open market." "Investors might adjust their positions proactively to hedge risk, which could amplify short-term volatility. But in the long run, Lee said the market will eventually absorb the new supply. "If sold in phases, the market could gradually absorb this batch of bitcoins. With the maturity of the bitcoin market, and more institutional investors and hedge funds getting involved, it may be able to handle such sales. If the bitcoin is auctioned off effectively, the long-term price impact may be relatively limited."
Despite the growing headwinds, Miles, a market analyst, still maintains that a parabolic rally is possible before the end of 2024. "After months of consolidation, I believe most people are a little disheartened with Bitcoin right now," Miles wrote in an X update. "However, my view remains we are approaching the final stage of a bull market, which should be the most volatile way up." He added, "It has definitely taken longer to get here than I was expecting, but that's how it is." "Considering the start of the Fed rate cut cycle, as well as the positioning of stocks, yields, and DXY, I think we could see $100k this year."
His view differs from many analysts in the duration of the bull market, with Miles forecasting that "the bull market will end this year in a rather abrupt fashion, which is not something I think a lot of people are expecting. In my opinion, the trap is that the bull market will be pushed out until 2025 on the back of the ETF narrative, Fed rate-cut narrative, and even a Trump election win." He said, "In contrast, in my view, the reality is that the Fed starting to cut rates is a warning sign that a risk asset bull market is coming to an end." "However, that being said, I am not glued to a specific timeline, and if we roll into 2025, so be it. A bull market is a bull market after all. Please note this is not advice, just my written view on the market over several years."
Bitcoin is currently trading at $60,669, down 2.2% on the 24-hour chart.
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