Bitcoin Drops to Support as Imminent CPI Print Shakes Crypto and Stock Markets

Crypto and equity markets fell slightly on August 9 as traders got a little nervous ahead of tomorrow’s Consumer Price Index (CPI) report. The details of the print will determine whether the Federal Reserve’s aggressive interest rate hikes are effective in curbing runaway inflation and this could impact the magnitude of future hikes.

Earlier in the week, Tesla CEO Elon Musk suggested that the July data would reflect the peak of inflation in the United States and that any recession would be “mild to moderate”. Right now, the consensus is that July’s data will be lower than the all-time high of 9.1% seen in June. The price of energy commodities (oil, natural gas) declined significantly in July and the Fed is hoping that previous consecutive increases of 0.75 basis points will combat soaring prices in other parts of the economy.

As usual, Bitcoin (BTC), Ethereum (ETH) and most altcoins pulled back as traders cut risk ahead of the CPI print. BTC price dropped to $22,800, while Ether corrected to $1,670. The rationale that traders are sheltering in stablecoins is reasonable, but from a technical analysis standpoint, the August 9th pullback is simply a test of lower support after the latest support-resistance reversal in the last week, and large-cap assets like ETH and BTC continue to trade within their multi-week ranges.

Traders take shelter until CPI releases

According to independent market analyst Michaël van de Poppe, the fear surrounding the August 10 CPI is “unjustifiedand once the round of retesting is complete, the price of BTC is expected to rally towards $28,000.

Adding to the narrative that the current pullback is “expected”, trader @52kskew suggested that BTC’s price action is affected by a “healthy perp unwind” as spot Bitcoin is sold at “logical resistance”.

Pseudonymous trader Big Smokey Explain that the market-wide correction “simply reduces risk for traders waiting for this week’s CPI print.”

According to Big Smokey, the tendency for traders to “interpret recent Fed+ post CPI print market performance statements” as dovish continues and if this trend continues, the market could rebound if the inflation numbers are lower than in June.

Analyst Dylan LeClair, meanwhile, believes that in the grand scheme of things, stocks are in the “late stages of a bear market rally in stocks” and he suggested that BTC will sweep swing lows over the next six to 12 months if an “event correlation 1.0″ occurs.

The total cryptocurrency market capitalization now stands at $1.09 trillion, and Bitcoin’s dominance rate is 40.5%.

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