Bitcoin surges after producer price data

The reigning cryptocurrency benefits from slowing inflation and the promise of a new crypto-friendly government.

The price of bitcoin experienced a remarkable increase of 2.29% on Tuesday, reaching a high of USD 97,371. This rally in bitcoin comes against a backdrop of slowing producer price growth, creating a favorable environment for digital assets. With just six days to go until the start of the new US government, which has expressed support for cryptocurrencies, the market is at a decisive moment.

Bitcoin price saw a remarkable 2.29% increase on Tuesday, reaching a high of $97,371 / TradingView

Slowing inflation: A boost for bitcoin

The US Bureau of Labor Statistics reported that the Producer Price Index (PPI) for final demand advanced just 0.2% in December, which benefited bitcoin. This is a significant decline from 0.4% in November. This cooling in price growth, especially in goods, reduces the pressure on the Federal Reserve to raise interest rates. This traditionally benefits cryptocurrencies by weakening the dollar.

The DXY index, which measures the strength of the dollar against other currencies, fell to 109.75 points, reinforcing the bullish movement in the cryptocurrency market.

Increased interest in futures and dominance of bulls

The recent rise in Bitcoin was also accompanied by an increase in open interest in futures, which reached USD 61.56 billion, up 3.82%. In the last 24 hours, total Bitcoin liquidations amounted to USD 70.58 million, of which 78.57% were short positions. This indicates that bulls took control of the market after a three-day bearish streak.

Despite ETF outflows amounting to nearly $1 billion over the past three days, Bitcoin managed to partially reverse its losses. This suggests a shift in investor sentiment.

Technical Analysis and Outlook

Coinmarketcap's Fear and Greed Index stands at 46 points, indicating that the market is in a neutral zone, awaiting fresh US inflation data. At the time of writing, Bitcoin was trading above the EMA50, which acts as dynamic support at $94,500, preventing declines to lower levels. However, the price is facing significant resistance at $101,000.

Among altcoins, Ethereum (ETH) is up 6.94%, BNB 4.12%, Solana (SOL) 5.64%, and XRP 8.77%. Cryptocurrencies AI16Z, VIRTUAL, KAS, SPX and DEXE led the Coinmarketcap Top 100, with returns of over 19%.

A promising future for Bitcoin

The combination of a more stable macroeconomic environment and government support for cryptocurrencies suggests that Bitcoin could be on the threshold of a new growth phase. Investors will be keeping an eye on upcoming economic data, which could define the direction of the market in the coming weeks.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in cryptocurrencies involves risks and thorough analysis is recommended before making investment decisions.