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Bitcoin Remains Resilient in the Face of Rising U.S. Inflation Concerns
Against the backdrop of unsettling macroeconomic data from the United States, Bitcoin demonstrated quick gains at the commencement of Wall Street trading on May 26.
Data gathered from Cointelegraph Markets Pro and TradingView revealed Bitcoin inching towards $27,000 on Bitstamp.
Bitcoin's value surprisingly surged following the day's Personal Consumption Expenditures (PCE) data, which indicated the first upswing since October 2022.
Implications of Persistent Inflation
Typically, such an uptick could be an obstacle for risky assets like cryptocurrencies as it signals enduring inflation, implying a need for further fiscal tightening to keep it in check.
Financial analysis platform, The Kobeissi Letter, partially responded by indicating, "This is a significant stumbling block in the Fed's battle against inflation."
Kobeissi further highlighted the swift shift in the Federal Reserve's interest rate hike expectations due to the PCE event.
According to the FedWatch Tool by CME Group, the market now slightly favors a rate increase in June, whereas previously, an 80% certainty of a pause was predicted.
Market Reactions and Expectations
Financial commentator, Tedtalksmacro, acknowledged the relative nature of the PCE gains, stating, "US PCE data came in higher than anticipated. However, on a 3-month annualized basis, core PCE showed a significant decrease...down to 4.2%."
Traders found a glimmer of hope in the concurrent news that the Biden administration was close to resolving the debt ceiling issue, with the deadline rapidly approaching.
The S&P 500 and Nasdaq Composite Index were showing positive movements, up by 1% and 1.65% respectively, at the time of reporting.
Bitcoin's Market Projections Amidst Strong US Dollar
Shifting focus to Bitcoin's performance, Michaël van de Poppe, the founder and CEO of trading firm Eight, pointed out the likelihood of Bitcoin continuing its upward trend.
Citing the day's price movements, he noted, "Bitcoin has managed to recover $26,600 and is projected to approach the range highs. If the recent downturn is just an outlier, we might see a leap to $29,000 next week."
He did warn that the PCE results were "not a favorable indicator" for risk assets and pointed out the instant reaction for a stronger U.S. dollar — usually in an inverse relationship with cryptocurrencies.
The U.S. Dollar Index (DXY) reached 104.4 on the day, the highest since March 17.
Renowned trader Justin Bennett projected in a specific forecast, "A consolidation after this month’s rally would be beneficial for the dollar. A daily and weekly close above 104.20 could push it to 105.00 early next week. A daily close below 103.50 would make me bearish on the DXY."
