Bitcoin Price Consolidation Continues Amid Inflation Concerns and ETF Outflows
Bitcoin is currently trading around $97,000, exhibiting a muted performance this week as investors weigh concerns over U.S. trade tariffs and persistent inflation. Despite a brief respite from news of delayed implementation of former President Trump’s proposed tariffs, the world’s leading cryptocurrency remains below the $100,000 mark, caught in a holding pattern that began in mid-December.
Inflation and Tariffs Weigh on Crypto Demand
The cryptocurrency market has faced headwinds from macroeconomic factors this week. Hotter-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) data have dampened expectations for Federal Reserve interest rate cuts. Market participants now anticipate only one 25 basis point rate cut this year, a sentiment that isn’t even fully priced into current valuations.
Adding to the cautious mood, concerns surrounding potential reciprocal trade tariffs continue to linger. While the implementation of these tariffs has been delayed, allowing time for negotiations, the prospect of their application in the second quarter of the year is keeping investors on edge. This caution is reflected in the recent performance of spot Bitcoin Exchange Traded Funds (ETFs), which have experienced four consecutive days of outflows, totaling nearly $680 million week-to-date, according to data from Coinglass.
Sentiment Remains Neutral, But On-Chain Data Offers Hope
Market sentiment remains largely neutral, with the Fear and Greed Index peaking only once this year. Historically, a strong correlation exists between this index and Bitcoin’s price, with sustained “greed” often preceding rallies. However, the market has yet to enter a state of “extreme fear,” which typically signals a potential market bottom.
Despite the broader market uncertainty, on-chain data suggests a potential stabilization. Selling pressure from short-term holders is easing, with the volume of Bitcoin spent at a loss falling to 3.8K BTC from 5.5K in early February, approaching the yearly average of 3.5K. This slowdown in panic selling indicates a degree of market stabilization. Furthermore, long-term holders remain largely inactive, suggesting continued conviction in Bitcoin’s long-term prospects.
One analyst noted that retail investor activity is also showing signs of resilience. On-chain transactions under $10,000, typically associated with retail investors, have fallen by only 2% this week, significantly less than the 20% decline observed in January. This suggests improving market sentiment among smaller investors, potentially favoring near-term upside for Bitcoin.
MVRV Ratio Hints at Undervaluation
The Market Value to Realized Value (MVRV) ratio, a metric used to assess whether Bitcoin is over or undervalued relative to its historical performance, remains below levels seen in previous bull cycles. This suggests that the cryptocurrency may still possess significant upward potential.
Technical Analysis: Navigating the $91.5k – $100k Range
Bitcoin continues to consolidate between $91,500 and $100,000, currently hovering around $97,000. The price is currently supported by a multi-month rising trendline.
According to technical analysis, buyers will need to break above the 50-day Simple Moving Average (SMA) and the $100,000 level to retest $106,000. A successful breach of this resistance could pave the way for a higher high, potentially reaching $109.5k and fresh all-time highs.
However, if sellers, supported by the Relative Strength Index (RSI) below 50, manage to break the rising trendline support, a decline towards $91.5k could be anticipated. A break below this level would be needed to confirm a lower low and a potential shift in the overall trend.
