As US disinflation continues and the market fears a US federal government shutdown by June 1, Bitcoin (BTC) price continues to build a retracement wave amid rising volatility .
Good news, disinflation in the United States should continue
Two fundamental subjects are on the front of the stage by the end of May. Besides, they both have a strong impact on the trend of so-called risky assets on the stock market:
- The US federal government’s public debt ceiling;
- The trend in the inflation rate in the United States, the decline of which determines the Fed’s expected pivot next fall.
On the subject of disinflation, recent updates fuel optimism as for the normalization of the price regime in the United States with a new low this week in the consumer price index and the producer price index.
The well-respected institutional finance app, Truflation (see the first chart below), describes that the inflation rate is at a new annual low. This is very positive fundamental data for the cyptocurrency market.
On the other hand, there is a risk of tension between now and the end of the month on the side of the budgetary policy of the American federal state. The latter could be in a situation of technical defect from the 1er June if an agreement is not found between Republicans and Democrats to raise the public debt ceiling.
If the U.S. federal government were to shut down (“ shutdown ”) due to lack of funding, this would produce strong downward pressure on the US equity market and by correlation on the price of cryptos. Even if such a scenario were temporary, high volatility in the price of Bitcoin (BTC) should then be expected.
Graph from the Truflation application which reveals a fair and current representation of the inflation rate in the United States
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Bitcoin price still bullish (for now)
Regarding the volatility of the bitcoin price, observers have noticed that for a few weeks, the market is getting into the habit of chasing protective stop orders looking for cash to enter the market.
This phenomenon is largely due to growing illiquidity on crypto exchanges. This is due to 3 reasons:
- The withdrawal of crypto market makers since the crypto business of the year 2022;
- The increase in the cold storage rate for the BTCs held;
- Stop hunting which is a well-known method of strong hands to get into the market well by attacking retail traders’ stop packages.
The best way to guard against such a situation that can cause trading losses is to enter the market in a millimetric way in accordance with the major chartist thresholds and to reduce its nominal exposure in order to be able to place a wider stop.
The volatility currently depicted by bitcoin is between support at $27,000 and resistance at $29,000it is short-term volatility.
Regarding the underlying trend, the graphic threshold guaranteeing the recovery has not moved, it still sits at $25,000. The market must defend this threshold to consider another attempt to break through the resistance at $32,000.
Chart made with the TradingView site and which shows the price of the bitcoin future contract in daily Japanese candles
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Vincent Ganne is a market strategist, technical analyst, trainer on the stock market and speaker on BFM Business. With a long experience in the field of analysis, he offers a global approach to financial markets. Both from a macroeconomic point of view and from a microeconomic point of view. Vincent Ganne also uses many aspects of chart analysis with the aim of forecasting trends in financial assets over the medium and long term.
Vincent Gane
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