If you’ve been waiting for the upcoming summertime spike in price volatility, look no further than today’s cryptocurrency market.
First, bitcoin and ether edged higher after an encouraging dovish U.S. inflation report. Then, the price of the leading cryptocurrency by market capitalization fell as internet rumors circulated that the U.S. government was selling $324 million in bitcoin. But Bitcoin rose again as investors regained their balance.
These ups and downs reflect ongoing uncertainty in the crypto world and broader macroeconomic conditions. Investors remained cautious throughout the spring as they looked for momentum to push bitcoin prices higher from the current $25,000-$30,000 range. So far, it is uncertain when the catalyst will appear. BTC has appeared to be highly sensitive to single events and minor swings in market sentiment in recent times, though Wednesday’s positive move provided the latest evidence of its resilience.
Investors appeared to be encouraged within an hour of the Labor Department’s release of the U.S. consumer price index (CPI), which unexpectedly fell to 4.9 percent in April at the start of Wednesday, pushing bitcoin and ethereum prices up 2 percent and 1.4 percent, respectively. Those gains snapped a four-day streak of bearish trends. Economists had forecast CPI at 5%, in line with March’s data. Nearly a year ago, the CPI surged above 9%.
But bitcoin plummeted in the hours that followed, when rumors emerged that the U.S. government had sold more than 11,800 bitcoins. On-chain data shows BTC moving between the two wallets around 00:06 (UTC) the next day. The receiving wallet has a BTC balance of approximately $633 million, but only has 3 transactions on the Bitcoin blockchain.
To be sure, on-chain data provider Glassnode noted no change in the U.S. government’s Bitcoin balance. But subjective feelings often have a stronger influence than reality. In this case, even unfounded speculation seems to be enough to spook investors.
Source: Glassnode
Bitcoin prices started to move higher in the early afternoon when the rumors were more suspicious. BTC recently traded near $27,900, returning to where it opened the day after falling to a low of $26,900.
Bitcoin is currently 2.5% below its 20-day moving average of $28,520. Given the historical level of price activity around this location, support for BTC at current levels appears to be consolidating.
Both are showing similar behaviour, with the price also reverting back to the 20-day moving average.
Upcoming economic data include U.S. jobless claims and producer price index (PPI), both due on Tuesday.
They will form the basis for the U.S. central bank’s next big decision on whether to raise interest rates in June, with major implications for cryptocurrencies and other asset markets. Meanwhile, Bitcoin, like any other roller coaster, ends where it started.
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According to Coindesk
