The Impact of Hot PCE Data on Bitcoin
Key Support Levels and Consequences of a Decline
Analyst Insights: $84,000 Must Hold
Quick Facts
- Bitcoin price slides 3% in response to searing US inflation report.
- PCE data reveals higher-than-expected inflation rates.
- Analyst identifies key support level of $84,000 to avoid multimonth lows.
Bitcoin Faces Renewed Inflation Pressure: Can the Price Maintain Crucial Support?
The Bitcoin market is facing renewed pressure after the latest US Personal Consumption Expenditures (PCE) data revealed higher-than-expected inflation rates. The news sent the price of Bitcoin tumbling over 3% in a single day, sparking concerns about the cryptocurrency’s ability to maintain crucial support levels.
The Impact of Hot PCE Data on Bitcoin
The US PCE measures inflation from the perspective of consumers, providing a broader view of price pressures in the economy. When the data comes in hotter than expected, it can lead to increased concerns about inflation and, subsequently, a boost in Treasury yields. This, in turn, can put downward pressure on the price of Bitcoin.
The latest PCE data revealed that the annual rate of inflation rose to 6.4% in December, surpassing the expected 6.1% and marking the highest level in nearly 40 years. This jump was largely attributed to higher prices for food, housing, and other goods.
The sharp increase in inflation has led many analysts to predict that the Federal Reserve will begin to taper its stimulus measures earlier than previously anticipated. This could impact the liquidity in the cryptocurrency market, making it more difficult for investors to enter or maintain positions.
Key Support Levels and Consequences of a Decline
In the aftermath of the hot PCE data, Bitcoin’s price has fallen sharply, breaching a critical support level at $47,000. This level has acted as a floor for the market in the past, but a failure to hold here could lead to a more significant decline.
A breach of the $45,000 level would likely lead to a more pronounced selloff, potentially taking the price down to the $40,000 range. This would not only be a significant loss for investors but also trigger a wave of panic selling, further exacerbating the decline.
Conversely, if the $47,000 level holds and the price starts to recover, it could be a sign that the worst is behind us, and a potential bounce to $50,000 or higher is possible.
Analyst Insights: $84,000 Must Hold
One of the most prominent cryptocurrency analysts, Charles Edwards, has warned that a critical level of $84,000 must hold to avoid another trip to multimonth lows. Edwards, the founder of Paradigm, points out that this level marks the intersection of several key technical and psychological levels, making it a crucial point of support.
“If Bitcoin breaks below $84,000, it will be a clear sign that the market is entering a bear phase,” Edwards warned. “The next stop would likely be around $40,000, which would be a major low for the year.”
Edwards attributes the current weakness in the market to a combination of factors, including the rise in Treasury yields, decreased institutional involvement, and increased volatility.
