- The crypto market is looking a little dicey ahead of a CPI outline this week
- The data will impact risk markets’ risk appetite
- Bitcoin and the wider crypto market both fell through support levels last week
The crypto market is looking a bit dicey going into a CPI week, having fallen through a level of support. This means that, with important data on the U.S. economy to come this week, there’s a chance that further haircuts could be on the table. Let’s have a look at where things stand and what could happen if a negative catalyst does come in.
Fall Through Support Bodes Ill
We can get a good steer on how the crypto market in general is starting the week with a look at the total market cap:
As we can see, it couldn’t clear the $1 trillion mark and has now dipped back below the first level of support at $980 billion. This sets up the potential for further lows, if there is a catalyst for a drop:
The situation is almost echoed with Bitcoin, which is sitting just underneath a level of support, just begging to be rejected:
Were this level to act as resistance again, as it did in November last year, then a drop underneath $21,000 is likely.
The situation is even clearer when looking at the Bitcoin cloud indicator:
As we can see, Bitcoin has started to curve down again following its breakthrough, mirroring a pattern we saw during a couple of failed breakouts in 2020. If Bitcoin can stay above this red line then this would be extremely bullish, but at the moment it looks like a reversion back underneath it is more likely.
CPI Data Could be Catalyst
If Bitcoin needs a catalyst to enact these drops, what could that be? Well it just so happens that the U.S. Consumer Price Index (CPI) data is out this week, which will give a clear indication of which direction the U.S. economy is heading in. The outcome is fairly straightforward – if the data is favorable to consumers then risk-on assets will rise, but if it is not favorable then these downward projections will almost certainly materialize.
The data is due tomorrow, so barring any extreme news in the interim, all eyes will be on tomorrow.
