How did Bitcoin price react to the release of US inflation data?

Let's take a look at all the details below.

Summary

  • Current Bitcoin market cycle: Smaller declines compared to other years

  • Market driven by Bitcoin holders, but speculators are increasing

  • US CPI: Consumer Goods Inflation Data and Its Impact on Bitcoin Price

Current Bitcoin market cycle: Smaller declines compared to other years

Currently, the Bitcoin market is propped up by long-term holders who, like true “diamond hands,” refuse to sell their crypto holdings.

But at the same time, the number of short-term bettors has increased significantly since the beginning of 2024, following the approval of spot ETFs: their holdings now account for a large portion of the Bitcoin supply.

Before we delve into the roles of various types of Bitcoin holders in the current market situation, let’s first look at how the cryptocurrency’s price has performed during this cycle.

After a long bear market driven by high inflation, rising interest rates and the collapse of cryptocurrency companies in the United States in 2022, the bull market returned, ushering in the fourth bull run in history.

Bitcoin's 2023-24 cycle is very similar to other previous cycles, with a strong initial rise, followed by a more or less sharp correction and then a rise.

In the last quarter, May and June to be more precise, we recorded the most significant decline since the end of the bear market, falling -26% from its all-time high.

While this may seem significant for price action, it is worth noting that this downtrend in the bull cycle appears to be weakening.

Unlike previous years, this disarmament appears to be the smallest ever in a similar context.

Leaving aside the two years after the genesis block, we actually note that previous bull runs saw declines ranging from -36% to 71%.

 

However, if at first glance this cycle seems to be one of the best in terms of price evolution, we are wrong. The maturity of the cycle is not calculated based on only partial data of retracements, but several factors need to be taken into account.

One of these is Bitcoin’s historical performance from the date of the halving, when the block reward for miners is cut in half.

In fact, the 2023-24 cycle was the worst of the four with a -13% return, according to Glassnode.

In the 2011-13 cycle and the 2020-21 cycle, positive performances of 117% and 30% were recorded, respectively, with the same number of days having passed since the halving.

In the 2016-17 cycle, we saw similar negative returns as in this cycle, but with less selling pressure, peaking at -7%.

Market driven by Bitcoin holders, but speculators are increasing

The Bitcoin market is still dominated by long-term holders, who hold approximately 14.8 million BTC, equivalent to 70% of the supply.

Long-term holders are individuals who hold the currency for at least 155 days without moving.

Such entities often begin liquidating positions prior to a major market peak and then continue accumulation activity.

According to Glassnode, short-term holders are currently driving the price of Bitcoin, which is contrary to traditional dynamics.

While Diamond Hands has sold around 1.5 million BTC since the beginning of the year, the amount of BTC held by speculators has grown to over 1 million BTC.

At the same time, prices have seen explosive bullish moves driven by the listing of spot ETFs and the containment of inflation in the United States.

However, in recent months, this demand has reached a growth plateau, suggesting that supply and demand balance has been achieved in the second quarter of 2024. Since then, this balance has been replaced by an oversupply situation, as fewer long-term holders are taking profits and fewer new buyers are coming in to accumulate holdings.

By analyzing the behavior of short-term speculators, we can get a general idea of ​​the price trend of Bitcoin. Usually, the low point of each cycle is formed when the so-called "short-term holders" lose 1-2 million BTC on their BTC shares.

According to Glassnode, in extreme cases, these entities hold up to 3 million BTC at purchase prices below market prices.

As of today, the amount of coins lost by gamblers has risen to over 2.8 million BTC after a multi-day drop to $53,000.

This suggests that the Bitcoin price has bottomed out or is about to bottom out.

US CPI: Consumer Goods Inflation Data and Its Impact on Bitcoin Price

Short-term Bitcoin holders did not sell to whales today, especially after the release of inflation CPI data in the United States.

U.S. consumer price inflation is expected to come in at 3.1%, down from 3.3% in the previous survey.

Judging from the data released so far, the US's tight and loose policies have achieved results, and the inflation rate seems to have dropped to 3%, which is better than expected.

Therefore, investors are making their needs felt in the cryptocurrency market, supported by the idea that interest rate cuts are more likely starting in September.

In the first minute after the CPI and inflation data were released, the price of Bitcoin did increase by 1.06%, and the trading volume was particularly significant.

However, just 20 minutes after the data was released, bears returned to the market and exerted pressure, causing prices to fall back to the level before the CPI release.

As of writing, BTC is trading at $58,700, up 1.26% from yesterday and 2.48% from last week.

These short-term movements are unpredictable and can confuse analysis that is more focused on higher time frames.

We must not think about how the market reacts to the release of inflation data, but rather how the market reacts overall in the coming weeks/months.

By doing so, we can actually recognize whether these dynamics are favorable for the continuation of the crypto bull run.

Regardless, today’s data bodes well for the next two quarters of the year.


#BTC下跌分析 #美国6月CPI大幅降温 #币安7周年 #德国政府转移比特币 #美联储何时降息？ $BTC $PDA $OM