On August 14, the U.S. Bureau of Labor Statistics (BLS) disclosed the Consumer Price Index (CPI) inflation data for July, prompting Bitcoin‘s price to ascend to $61,809. The newly released data indicated an inflation level of 2.9%, a decrease from June’s figures. However, the situation quickly evolved as Bitcoin’s value dipped below the $60,000 threshold.
What’s Behind Bitcoin’s Price Movement?
Sudden price changes in assets, known as volatility, often mislead investors. Bitcoin experienced such volatility when it surged to nearly $62,000 following the release of the July CPI data. As market conditions stabilized, the cryptocurrency’s price reversed, falling below $60,000, creating a critical resistance level. At the time of this report, Bitcoin was trading at $58,069, an 8% drop in the past 24 hours.
How Are Investors Reacting to the Trend?
Since reaching $62,400 on August 9, Bitcoin has struggled to maintain its position above $60,000, resulting in fewer profitable daily transactions. An analysis of the daily transaction volume’s profit/loss ratio (with a seven-day moving average) on August 15 revealed that Bitcoin investors experienced more losses than gains.
As of now, the value stands at 0.88, meaning for every transaction ending in a loss, only 0.88 transactions ended in a profit. Additionally, the demand for short positions has increased, as indicated by a negative funding rate of -0.004% in the last 24 hours on cryptocurrency exchanges. A negative funding rate implies that more investors anticipate a price decrease, opting to short sell the asset.
Key Investment Inferences
- Current funding rate of -0.004% shows higher demand for short positions.
- An asset trading below its 20-day EMA signals a short-term bearish trend.
- A potential drop to the support level at $54,847 if bearish momentum continues.
- A rebound to above $60,000 is possible if market sentiment becomes bullish.
Bitcoin’s Future Price Movement
Bitcoin’s decline below the $60,000 mark has also seen it dip under its 20-day exponential moving average (EMA), a metric indicating the average price over the last 20 trading days. Trading below this average suggests a short-term bearish trend, revealing weaker recent price movements compared to the 20-day average.
Should Bitcoin fall further below this critical moving average, it could descend to the next support level of $54,847. Conversely, if market sentiment shifts positively, the cryptocurrency could reclaim the $60,000 level and potentially trade above $61,388.