Bitcoin Gets a Breath of Fresh Air as PCE Inflation Slows

Bitcoin's slide slows after encouraging inflation data, as investors bet on a shift in Fed monetary policy.

Bitcoin found some respite after a week of sharp declines, closing at $84,349 after hitting a low of $78,258, thanks to the slowdown in the US PCE inflation index. The possibility of rate cuts by the Fed and a hammer candlestick pattern on the charts rekindle hopes for a rally in cryptocurrencies.

Bitcoin price remains below the EMA200, which acts as dynamic resistance at $85,600, sending a long-term bearish signal. / Tradingview

PCE Slowdown: A Breath of Fresh Air for Bitcoin

The PCE Price Index, the Federal Reserve's preferred inflation indicator, showed an annual slowdown of 2.5%, down from 2.6% previously. This data, in line with expectations, suggests that inflationary pressures could be peaking. For its part, the Core PCE, which excludes food and energy, fell to 2.6%, its lowest level since June 2024, reinforcing the idea of ​​a weakening in domestic demand.

These numbers increased bets in the federal funds market, where there is now a 58.6% chance of a rate cut in June. This scenario generated optimism among investors, who see monetary easing as an opportunity for risk assets such as bitcoin to regain ground. For some investors, bitcoin is a risk asset as it is correlated with the Russell 2000 index.

Bitcoin: From the fall to the hammer of hope

The day for bitcoin was marked by high volatility. After an initial fall driven by fear of the tariffs announced by Donald Trump to Europe, the cryptocurrency hit a low of $78,258 before recovering and closing at $84,349, with an intraday high of $85,120. Although the day's drop stood at 0.42%, the formation of a hammer candle on the charts suggests a possible price reversal.

This pattern, accompanied by a trading volume that almost tripled the 25-day average on Binance, set off traders' red flags. However, many are waiting for confirmation with a bullish candle forming a "morning star" pattern before declaring a trend change.

Massive withdrawals and increased confidence in Bitcoin

The drop in the price of Bitcoin also triggered a significant movement in the market. According to data from Coinglass, 26,286.73 BTC were withdrawn from centralized exchanges in the last 24 hours. This movement suggests that investors are moving their funds to self-custody wallets, reflecting increased confidence in Bitcoin in the medium and long term.

On the other hand, Bitcoin's open interest (OI) fell to $49.60 billion, its lowest level in three months, while net capital flow in the spot market was negative, with outflows of $392.82 million in one day. This data indicates that there is a reduction in leverage.

Is Bitcoin in the oversold zone?

The Bitcoin price remains below the EMA200, which acts as a dynamic resistance at $85,600, sending a long-term bearish signal. However, the BBP indicator suggests that Bitcoin is in the oversold zone, which could indicate that it has reached a key support. If the price manages to overcome the resistance of $85,600, a change in trend could be confirmed.

A favorable scenario for cryptocurrencies

The slowdown in the PCE and expectations of rate cuts by the Fed create a favorable scenario for risk assets, including cryptocurrencies. Although Bitcoin is still facing technical resistance, indicators suggest that it could be gearing up for a rally if a trend reversal is confirmed. Meanwhile, investors continue to accumulate Bitcoin, demonstrating their confidence in the leading cryptocurrency for the long term.

Disclaimer: The information provided in this article is for informational and educational purposes only. It does not constitute financial, investment, legal or any other advice. The cryptocurrency market is highly volatile and prices can fluctuate significantly in short periods of time. Readers should conduct their own research and consult with a professional financial advisor before making any investment decisions.