Bitcoin hovers around $31,000 with an eye on U.S. inflation

Cryptocurrencies rise moderately on Wednesday. Bitcoin (BTC) soars around 0.3% and manages to climb to $30,700, while Ethereum (ETH) follows in its wake and is approaching $1,900.

Digital assets are moving patiently ahead of the key US inflation data for June. The consensus anticipates a drop to 3.1% year-on-year from 4% in May, while the underlying rate would trim considerably less to 5% versus 5.3% the previous month. Depending on what the final reading is, market reaction could vary dramatically.

"We strongly believe that the US inflation data today is going to be much better than most speculators believe. This means that the US CPI data is highly likely to print, which is not going to be anything higher than the forecast or even lower," commented Naeem Aslam, chief investment officer at Zaye Capital Markets.

According to the expert, "if the number comes close to the forecast of 3.1% or even at 3.1%, we believe that this will be considered good news for the market as the Fed’s inflation target is 2%. If the number comes in below the 3.1% mark, it will be celebrated by market players, as that would mean a significant shift in the inflation reading." It is worth remembering that the Fed warned that it will not hesitate if it has to further tighten interest rates and the market, which has taken note of the central bank's warning, is discounting two more hikes for the remainder of the year.

"But there is one thing that is highly important to pay attention to, and that is where the inflation reading will go from here. Yes, today we are going to see a massive drop, and that is due to tighter monetary policy, a slowdown in economic activity, and lower oil prices. From here on, these factors aren’t going to have a really significant impact on the inflation number, but it also means that the difference between the Fed’s target number and the actual reading may not be double what it is now," Aslam added.

For his part, Edward Moya, senior market analyst at OANDA, highlights that inflation "might fall to 2.9% and core could see the lowest reading since 2021, but sticky inflation signs will likely remain. "

The expert also pointed out that investors in the cryptocurrency market are still waiting for some positive news on spot Bitcoin ETFs from BlackRock, Fidelity and other institutional players to kick-start a bull cycle in the reigning cryptocurrency. This prediction is fairly widespread among analysts, who, even without being as optimistic as Standard Chartered, which puts Bitcoin at $120,000 in 2024, see a bull market as inevitable for next year.

On the technical side, Javier Molina, market strategist at eToro, highlights that, "if prices are able to break above $31,000, the medium-term structure would change and we would pose a very bullish scenario with the first target at $36,000 and $40,000 as the next reference." "However, not being able to overcome $31,000 brings the scenario back to the downside whose main support goes through $25,000 if $29,500 is lost first and $28,000 as second support," added Molina.

In the rest of the market, there are few movements among the main altcoins. The 0.5% rise in Cardano (ADA) and the 0.4% sell-off in Solana (SOL) are noteworthy.