Cryptos moderate their rebound after the US CPI; Bitcoin tests $25,000

Cryptocurrencies extend Tuesday's gains. Bitcoin (BTC) moderated its gains after surpassing $26,000 and is close to $25,000 on Wednesday. For its part, Ethereum (ETH) rises nearly 2% in the last 24 hours and is trying to consolidate at the $1,700 level.

February's inflation reading in the United States catapulted cryptocurrencies´ prices, which were notably above the levels seen before the crisis unleashed by Silicon Valley Bank (SVB). The CPI moderated to 6% year-on-year, from 6.4% in January, according to data released on Tuesday by the U.S. Bureau of Labor Statistics. This decline was in line with market expectations, as well as the drop in the underlying rate to 5.5% y/y.

However, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, pointed out that the report also casts some shadows over the markets. "The uptick in core inflation on a monthly basis to 0.5% - a five-month high, and the stickiness of services inflation above the 7% mark, revived the Federal Reserve (Fed) hawks on fear that we may no longer see inflation trend lower in the coming months, if the Fed stopped tightening now and here," he explained.

"Discomfort regarding the US inflation data, combined with the gently waning stress in banks, brought the expectation of a 25bp hike back on the table, " the expert added, as he believes that "if we hadn’t had the SVB debacle, that expectation would’ve easily been stuck around 50bp. And this is something that we could see reflected in the Fed’s March dot plot."

In this regard, Naeem Aslam, chief investment officer at Zaye Capital Markets, noted that despite the US government's "swift" action, only some fears caused by SVB's collapse have been adressed. "This does not imply that traders and investors should start walking about blindfolded. There is still a lot of danger since the entire thing started with the Fed hiking interest rates. We are afraid that the Fed is under pressure as a result of rising inflation data, which we saw yesterday, and that they will continue to tighten monetary policy," he stated.

"A simple approach would be to reintroduce loose monetary policy and kick forward and deal with this problem later," Aslam added. The analyst also pointed out that we will have to keep an eye on the retail sales figure and the Empire State manufacturing index, which could give the Fed reason to raise rates by 50 basis points if they are too positive.

On a technical basis, Aslam highlighted that Bitcoin "seems to be developing a bearish pattern, indicating that a top may be in the works for the time being." "Bulls, on the other hand, should rejoice since the price has broken above the 25K level, which was an important resistance zone, and a breach of this level has opened the way for the price to re-test its next resistance zone of 30K," he added.

On the other hand, we will have to keep an eye on how the investigation being carried out by the US Justice and SEC on the bankrupt Signature Bank develops. According to 'Bloomberg', investigators from the Department of Justice in New York and Manhattan are examining whether the bank has taken sufficient measures to detect money laundering by users and other violations of federal laws.

In other market news, there have been notable gains. In the last 24 hours, the market's main tokens have registered gains of more than 1%, with some such as Polygon (MATIC) or Solana (SOL) rising more than 5%.