Bitcoin Price Dips Below $49,000 on US CPI Data
The Bitcoin (BTC) price has fallen below $49,000 following the release of higher-than-expected US Consumer Price Index (CPI) data for January. Earlier in the session, BTC hit a two-year high near $50,400.
Currently trading around $48,500 on major cryptocurrency exchanges, BTC is down nearly 3% for the day.
Rising Inflationary Pressures Reduce Rate Cut Bets
The unexpected rise in inflationary pressures suggests that Federal Reserve (Fed) policymakers are right to be cautious about rate cuts. This data has caused macro investors to pull back on rate cut bets.
Money markets now imply a less than 40% chance that cuts will start in May, down from over 60% just one day ago. However, the market still believes that rate cuts will begin in the first half of 2024.
Bitcoin Price Under Pressure as US Yields Rise
The prospect of higher interest rates for a longer period of time has led to an increase in US government bond yields and the US Dollar Index (DXY). This rise in yields is impacting interest-rate-sensitive assets like Bitcoin.
As a result, the S&P 500 and gold have also experienced declines. Bitcoin’s price is affected because rising yields on risk-free assets reduce the incentive to hold riskier or non-yielding assets.
Spot Bitcoin ETFs Continue to Attract Inflows
Despite the recent price pullback, spot Bitcoin ETFs are still seeing strong inflows. These inflows have been driven by the approval of spot Bitcoin ETFs in the US and a slowdown in outflows from Grayscale Bitcoin Trust (GBTC).
On Monday, spot Bitcoin ETFs attracted over 10,000 BTC tokens. This demand is significant considering that miners only produce around 900 BTC tokens daily.
Bullish Outlook for Bitcoin Price
Despite the current price pullback, there are several factors that could drive the Bitcoin price higher. These include ongoing inflows into spot Bitcoin ETFs, the upcoming halving event in April, and potential macro tailwinds when the Fed starts cutting rates later this year.
Additionally, trouble in the US regional bank sector could lead to increased safe-haven demand for Bitcoin. Investors should view price dips as buying opportunities, as a retest of all-time highs at $69,000 later this year is still possible.
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