Bitcoin faces the challenge of inflation in the United States

Bitcoin price surprisingly avoided a sell-off on Wednesday following the release of the United States Inflation (CPI) for the month of March. How does BTC withstand rising market interest rates and the risk of a second wave of inflation?

The market no longer believes in this year’s FED 3rd rate cut

US consumer inflation for the month of March and CPI was eagerly awaited on Wednesday, coming in above expectations in both its core (the most important) and nominal versions. This CPI gauge, which has been overheated since the beginning of the year, is apparently being debated because it provides a representation of inflation that appears to be at odds with inflation observed in real time from much more direct sources.

For example, property rent inflation, which is still at 5.7% in CPI, while real estate websites and real estate indices, which provide the price of rents observed in real time, say that the rate of rent inflation is already below 2%. Real estate accounts for 40% of the CPI calculation, so this gap between the CPI and the real-time observed data is not a trivial fact and is explained by the delay (several months) before the data at time t comes back to the ICC.

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There is also this inflation of services reflected in the CPI (due to the spike in the price of auto insurance), while direct sources (such as the Truflation app) of real-time prices of a wide range of services describe the continued disinflation of service prices.

On the other hand, keep in mind that the Federal Reserve (FED) uses the PCE price index (and not the CPI) to track inflation, and that core PCE continues its downward trend as of the latest update.

In short, these multiple deviations, which can also be linked to the update of the CPI calculation methodology.

Finallyhigh finance is losing hope of seeing the Fed cut rates three times this year. According to the latest market expectations, only 2 rate cuts (at best) by the Fed are expected in 2024.

A graph designed by Bloomberg that reveals high finance expectations for the development of the Fed funds rate by the end of the year

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Bitcoin shows amazing resistance to the fundamentals of traditional finance

In terms of technical analysis, Bitcoin price technical analysis remains unchanged, with the market in a sideways transition phase since March 15. This pause period consolidates the vertical uptrend from late January to mid-March and can take several forms and have several amplitudes before allowing the underlying uptrend to continue.

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Price BTCUSDChart created with TradingView revealing weekly and daily Japanese candles for BTC/USD

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