FameEX Hot Topics | Bitcoin Declines Sharply After US Inflation Report Causes Panic in Stocks and Crypto

Bitcoin’s recent price action, marked by a sharp decline following the release of hotter-than-expected US Producer Price Index (PPI) data, has traders on edge. After reaching an all-time high of $123,400, Bitcoin swiftly dropped to $117,400, as the market digested the latest PPI reading of 3.3%, well above the anticipated 2.5% and last month's 2.3%. This surge in inflation represents the largest monthly rise in US PPI since June 2022, raising concerns about sustained inflationary pressures and the impact on risk assets like Bitcoin.

The PPI data stood in stark contrast to the more favorable Consumer Price Index (CPI) data released earlier in the week, which showed inflation holding steady at 2.7% year-over-year, with core CPI at 3.1%. This CPI print had initially sparked hopes for a near-term rate cut by the Federal Reserve, encouraging bullish sentiment in risk markets. However, the unexpected rise in PPI complicates this outlook, as it points to persistent inflationary pressures that could delay any potential monetary easing. For Bitcoin, this unexpected shift in inflation data has the potential to curb its short-term upside momentum.

Before the PPI release, there had already been signs of a possible correction. A bearish divergence between Bitcoin’s price and its relative strength index (RSI) emerged after the cryptocurrency reached new highs above $123,000, suggesting that a liquidity grab at these levels might be underway. The immediate price dip formed a swing pattern failure, pointing to the possibility of choppy price action in the coming days. Following the recent surge, Bitcoin has absorbed key internal liquidity zones between $119,000 and $117,500, setting the stage for a possible period of sideways consolidation after an 11% price increase in just 12 days.

Technically, Bitcoin now faces critical resistance and support levels that could shape its next move. A decisive close above $120,000 on the four-hour chart would signal a bullish continuation, allowing Bitcoin to target higher levels. However, the likelihood of a retest below $117,000 has grown, as indicated by a long-term market fractal pattern. Additionally, on the three-day chart, Bitcoin has formed a double top pattern, which historically has led to corrections, such as the one that took Bitcoin as low as $75,000 earlier this year.

Looking forward, Bitcoin's ability to maintain support above $112,000 is crucial. If the cryptocurrency can hold above this level, it could signal a period of consolidation that might allow altcoins to thrive. On the other hand, a drop below $112,000 would suggest a shift in the market’s lower time frame structure, potentially triggering further corrections toward levels between $105,000 and $110,000. With inflation data continuing to play a pivotal role in market sentiment, Bitcoin's price action will depend largely on how the Federal Reserve reacts to these inflationary pressures and whether the anticipated rate cut in September comes to fruition.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.