⚠️ Is the Bitcoin breakout a bull trap? ⚠️
The price of Bitcoin continues its rebound initiated during the trading session on Wednesday, May 1st, after establishing a low point at $56,500. The market is now surpassing resistances, but is it enough to dismiss the risk of a bullish trap?
Bitcoin surpasses resistances following the resumption of US disinflation
Contrary to the adage "Sell in May and go away," the stock market and bond market have re-engaged their bullish trend since the trading session on Wednesday, May 1st, with a favorable spillover effect on the price of Bitcoin.
The stock market remains supported by quarterly corporate earnings, optimistic profit outlooks for 2024 and 2025, and the rebound on support from US tech giants (GAFAM), notably Apple's superb rebound on medium-term chart support this May.
But the overall recovery is mainly supported by a general relaxation of market interest rates as the key factor of underlying disinflation seems to have resumed its downward trend in the United States.
This week first saw a surprising and significant downward revision of factory prices for the month of March in the United States (US PPI).
Next, the Consumer Price Index (CPI) was updated in the United States, and some key components brought hope for a return of underlying inflation to 2% on an annual basis in the coming months.
This is notably the case for housing inflation, which represents 35% of the total CPI calculation and whose real-time indicators still invite optimism.
But it is service inflation that remains a major concern, as leading indicators (ISM Services PMI) show a slowdown without yet resulting in a collapse of service inflation, especially insurance prices.
In short, if Bitcoin is attempting a bullish recovery, it is because it benefits from this glimmer of hope for the return of US inflation to 2%, potentially leading to a pivot by the Fed next September. But this glimmer is still weak, and the end-of-month update of the PCE price index will be decisive. Once again, we have seen that BTC remains highly correlated with the US macroeconomy.
BTC is bullish above the first support at $63,500/$64,500
To confirm my graphical working hypothesis, it was necessary for the price of Bitcoin to be able to surpass technical resistances, and this is what it has done in the wake of the US inflation update.
Now, it is necessary to confirm the change in technical polarity with a BTC that remains bullish in swing trading as long as the range of $63,500/$64,500 remains supported.
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