Cryptocurrency research institution 10x Research has released a new report stating that the key factor driving the trend of Bitcoin is the US Consumer Price Index (CPI) data. If the May CPI data, which will be announced on June 12, shows a slowdown compared to the previous month, Bitcoin will be able to reach a new all-time high.
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The US Bureau of Labor Statistics (BLS) announced on May 15 that the year-on-year growth rate of the Consumer Price Index (CPI) for April was 3.4%. The CPI data for May will be announced on June 12. 10x Research’s report suggests that Bitcoin can surpass its historical high in March only if the CPI slows down compared to the previous month.
Markus Thielen, Chief Research Officer of 10x Research, stated that in the two weeks prior to the announcement of the May CPI data, it is expected that the inflow of funds into Bitcoin spot ETFs will remain strong. However, if the CPI results are higher than expected, the momentum may weaken, as was the case earlier this year.
Since May 13, over the past two weeks, Farside data has shown that the average daily inflow of funds into Bitcoin spot ETFs has been positive. On May 21, it reached a record high of $305.7 million per day.
CPI data affects the trend of Bitcoin
It is worth noting that 10x Research believes that the trend of Bitcoin does not involve random fluctuations. The key factor driving its trend is inflation. The price of Bitcoin will change direction based on whether the CPI data is higher or lower than the previous month. If the CPI is higher than the previous month, Bitcoin will decline, while it will rise if the CPI is lower than the previous month.
When the CPI data announced on January 11 showed a year-on-year increase of 3.4%, higher than the expected 3.2% and the previous month’s record of 3.1%, Bitcoin declined and the trading volume of Bitcoin spot ETFs performed poorly. When the CPI data announced on February 13 showed a year-on-year increase of 3.1%, lower than the expected 3.4%, indicating a slowdown in inflation, the inflow of funds into Bitcoin spot ETFs gradually recovered.
When the CPI data rose again to 3.2% on March 12, the inflow of funds into Bitcoin ETFs immediately stopped. When the CPI data announced on April 10 reached 3.5%, exceeding the expected 3.4%, Bitcoin dropped again. When the CPI data announced on May 15 reached the expected 3.4% and was lower than the previous month’s 3.5%, Bitcoin rebounded accordingly.
However, 10x Research speculates that inflation will gradually cease to be a problem and will become a moderately strong upward driving factor. As time enters the end of summer, it may become a powerful driving factor, as their model predicts a gradual decline in inflation.
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