Benzinga - by Murtuza Merchant, Benzinga Staff Writer.
Bitcoin‘s (CRYPTO: BTC) rise to new highs may depend on a single data point—inflation—according to a new report by crypto research firm 10x Research.
The Critical Role Of Inflation 10x Research emphasizes that understanding Bitcoin’s price movements is less about random fluctuations and more about recognizing its critical drivers.
The firm notes, “Bitcoin reached a critical turning point two weeks ago,” pointing out that while retail flows have remained weak, institutional inflows have been significant.
They express confidence that Bitcoin will soon reach new all-time highs, driven largely by these institutional movements.
Institutional Inflows And Inflation Year-to-date, the crypto market has seen $54.6 billion in inflows, including $25.6 billion in stablecoins, $15.5 billion in perpetual futures leverage, and $13.5 billion in Bitcoin Spot ETF inflows.
These figures illustrate the robust interest and substantial capital flowing into Bitcoin and other digital assets.
A crucial aspect of these inflows has been their sensitivity to inflation data.
On January 11, spot Bitcoin ETFs began trading with significant initial inflows and trading volumes.
However, higher-than-expected inflation, with the CPI at 3.4%, dampened the enthusiasm, leading to a pause in ETF inflows. As inflation data fluctuated, so did Bitcoin’s fortunes.
CPI’s Influence On Bitcoin The report details how Bitcoin ETF inflows resumed when inflation moderated in February, only to slow again with higher inflation in March.
Notably, Bitcoin’s price fell from $73,000 to $60,000 due to inflationary pressures, with further declines following additional unfavorable CPI readings.
Each time, Federal Reserve Chair Jerome Powell’s assurances of potential rate cuts provided temporary relief.
Bitcoin’s price movements closely tracked CPI data, with lower-than-expected inflation typically leading to rallies.
For example, when CPI data released on May 15 showed a decrease to 3.4% from the previous month’s 3.5%, Bitcoin prices rallied, supported by resumed ETF inflows.
The report notes, “Traders who know how Bitcoin reacts to CPI should have confidence in trading in the opposite direction of the CPI change relative to the previous month.”
Also Read: Bitcoin To Peak At $150K, Crypto ETF Market To Grow To $450B: Bernstein
Projections And Future Expectations From March 12 to May 15, net ETF buying was just $1 billion.
However, following the favorable CPI report on May 15, there was a sharp increase in ETF inflows, amounting to $1.5 billion in just seven days.
With the next CPI data release scheduled for June 12, 10x Research anticipates continued strong inflows, potentially driving Bitcoin to new all-time highs.
The report projects that if inflation data for the next few months aligns with or falls below expectations (around 3.3% or lower), it will create a positive environment for Bitcoin.
“If inflation prints 3.3% or lower, Bitcoin should make a new all-time high,” the report asserts.
This trend is expected to provide ongoing support for Bitcoin Spot ETF investors, thereby bolstering Bitcoin’s price.
As the market keenly watches for the next CPI data release, the insights from 10x Research highlight the pivotal role of inflation in Bitcoin’s trajectory.
These findings and broader implications for the digital asset market will be further explored at Benzinga’s Future of Digital Assets event on Nov. 19.
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