Bitcoin bounces back after monthly low: Why it's crucial for traders to monitor macro data

The cryptocurrency market is currently experiencing significant fluctuations, reflecting the complex dynamics at play within the industry, including macroeconomic data from the US. Let's take a look at the key trends and events shaping the landscape, the struggles and recovery of Bitcoin (BTC), and what traders need to know to stay ahead of the current turbulence.

Bitcoin drops on sagging ETF holdings, then soars on US CPI release

The dip

Bitcoin, the original cryptocurrency and flagship for the digital asset sector as a whole, started the week under significant pressure. The price of BTC hit new June lows even as open interest in Bitcoin futures surged to $35 billion, indicating increased speculative trading. Such high levels of open interest can lead to heightened volatility, as large positions may be liquidated in response to market movements, causing sharp price swings.

Bitcoin slipped below $68,000 and dipped close to $65,000 on 11 June, marking a significant decline amid broader market sell-offs. This downturn was exacerbated by outflows from Bitcoin ETFs, which saw $64 million in withdrawals. The decline in ETF holdings indicates waning institutional confidence, which contributed to downward price pressure.

Despite the best efforts of bullish traders, BTC appeared to have rejected the $69,000 as support and also given up the 21-day moving average. This prompted a 3% dip, which is primarily attributed to the shifting liquidity landscape and the market's reaction to broader economic indicators.

The rebound

Things looked grim for the crypto market until a sudden reversal on Wednesday, when Bitcoin experienced a dramatic rebound following a single piece of US macroeconomic data, reversing several days of price declines.

Bitcoin surged sharply into the 12 June Wall Street opening after data revealed a surprising drop in US inflation. The original cryptocurrency gained $1,500 within mere seconds after the May Consumer Price Index (CPI) report indicated inflation was cooling faster than anticipated.

The Consumer Price Index is an economic indicator that measures the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. According to the latest figures from the US Bureau of Labor Statistics, the CPI remained unchanged month-on-month, while the year-on-year figure came in at 3.3%, both 0.1% lower than predicted.

''The all items index rose 3.3 percent for the 12 months ending May, a smaller increase than the 3.4-percent increase for the 12 months ending April. The all items less food and energy index rose 3.4 percent over the last 12 months,'' stated an official release from the US Bureau of Labour Statistics.

The favourable CPI data provided a boost to risk assets, including cryptocurrencies, which had been under pressure ahead of the report. This type of pattern has become typical for Bitcoin and altcoins, leading up to significant economic data releases.

With the market now anticipating the June meeting of the Federal Reserve's Federal Open Market Committee (FOMC), the focus shifted to potential interest rate changes and economic commentary from Fed Chair Jerome Powell, which could significantly influence market sentiment.

Financial commentator Tedtalksmacro expressed optimism in response to the CPI data, suggesting it provided Powell with the opportunity to consider easing the tight financial policies characterised by high interest rates.

''The stage is set for J Powell to talk easing. Let's go,'' he summarised on X (formerly Twitter).

Crypto and the US economy

Bitcoin's current comeback is driving gains across the wider crypto market, uplifting various altcoins like Ethereum (ETH), Ripple (XRP), Solana (SOL), and others. The key takeaway here is that crypto doesn't exist in a bubble separate from the mainstream economy. Instead, the fortunes of digital assets are intimately tied to the performance of fiat currencies, stocks, and commodities and influenced by real-life economic figures, including unemployment and consumer purchasing power.

Bitcoin's recent losses were spurred by the US employment data released last week. Its swift reversal, backed by the CPI information, illustrates just how important it is for crypto traders to keep up-to-date with mainstream economic news from the world financial superpower.

In particular, Bitcoin has a love-hate relationship with the top fiat currency that it was created to challenge: the almighty US dollar. USD strength and US Treasury yields actually declined following the CPI data release, making Bitcoin and altcoins more attractive for investors.

What's next?

Bitcoin's response to the latest CPI data illustrates the cryptocurrency's sensitivity to macroeconomic indicators and the potential for significant price movements based on shifts in economic policy expectations.

Traders looking for the next catalyst should watch for additional economic data from future US government communications, which could lead to further BTC price volatility. According to CME Group's FedWatch Tool, market expectations for a rate cut at the September FOMC meeting have increased to over 70%. As such, Bitcoin and the wider crypto market could enjoy another strong boost from lower US interest rates.

StormGain: your go-to tool for crypto trading success

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Given the current market conditions, having a reliable trading platform is essential for navigating the complexities of cryptocurrency trading. With StormGain, you can stay informed with real-time notifications on market movements, delivered 24/7 to your mobile device so that you don't miss important signals.

Whether you're looking to trade Bitcoin, explore the meme coin sector, or delve into altcoins, StormGain provides the tools and resources to level up your trading skills and make the most of your gains. Don't miss out on the next crypto surge. Join StormGain now and start your trading journey today!