Bitcoin Prices Rise Ahead of Key Inflation Data. Where CPI Could Send Cryptos.

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Crypto prices are likely to swing in step with stocks after the release of inflation data. Dreamstime

Bitcoin prices were rising Tuesday as investors awaited the release of key US inflation data, which should give traders their latest clue on Federal Reserve policy, which is by far the most dominant macro force shaping markets.

The price of Bitcoin has risen 1% over the past 24 hours to $22,400. The largest digital asset continued to edge higher after a rally late last week saw it pop up from around $18,500 and return it to the $20,000 to $25,000 range in which it has traded since a mid-June selloff knocked it down from $30,000.

It could all change with the release of the US consumer-price index inflation data at 8:30 am Eastern time. The Federal Reserve has aggressively tightened financial conditions in 2022 as it fights the highest inflation in decadesa shift that has raised the risk of recession and knocked cryptos and stocks alike. Bitcoin has tumbled more than 50% this year amid a selloff in risk-sensitive assets, with the Dow Jones Industrial Average and S&P 500 down 11% and 14%, respectively.

Expectations are for CPI to have risen 8% year-over year in August, down from 8.5% in July, with a 0.1% fall month over month. Any signs that inflation has peaked or is cooling could ease the pressure on the Fedwhose officials have reiterated the commitment to taming red-hot pricesahead of its next decision on interest rates following a Sept. 20-21 meeting.

Adding buoyancy to Bitcoin was a fall in the US dollar, which has torn higher this year and placed additional weight on the leading digital currency. The US Dollar Index, which measures the greenback against a basket of six peers, was down 0.5% on Tuesday in a fifth day of declines after hitting a new 20-year high last week.

Bitcoin is holding onto gains ahead of the inflation data, said Craig Erlam, an analyst at broker Oanda. A positive inflation number could see bitcoin add to recent gains with the next major test to the upside falling around $25,500.

Another analyst sees the technical picture as being a bit more difficult.

An oversold bounce has lifted bitcoin from longterm support in the $18,300 to $19,500 area, said Katie Stockton, managing partner at technical research firm Fairlead Strategies. As it stands, we assume the bounce will fail near resistance [around $23,000] given the prevailing negative long-term momentum, and we would be sellers on a reversal down in our short-term gauges.

Beyond Bitcoin, digital assets were generally weaker, with Ether falling 1% to $1,725. Trading in the second-largest crypto has been volatile ahead of a hotly anticipated fundamental upgrade known as The Merge, which is expected to be completed Thursday.

Altcoins, or smaller cryptos, were more mixed. Solana gained 2% but Cardano shed 2%. Memecoins were in the red, with both Dogecoin and Shiba Inu losing about 2%.

Write to Jack Denton at [email protected]

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