Crypto Markets Analysis: Falling Inflation Expectations Might Signal Bullish Turn for Bitcoin

It’s not a law of science but an investment thesis: Any increases in digital-asset prices may be driven in part by decreases in physical asset prices.

Bitcoin (BTC) and ether (ETH) started the week in positive territory, up 1.5% and 4% respectively on higher than average volume.

The price increases occurred on a day in which the Federal Reserve Bank of New York announced U.S. consumer inflation expectations of 5% for December, versus expectations of 5.2%. The 5% reading marks the second consecutive month of declines, and the lowest reading since July of 2021. Bitcoin and ether prices continue to be impacted by Federal Reserve actions to slow inflation.

The reduction of inflation expectations is a welcome sign for crypto investors placing long bets on either asset.

The expected 5% increase in prices is fairly in line with top Fed officials’ expectations for 2023 interest rate levels.

The largest decrease in expectations is attributable to gas, falling 5.9% over the prescribed time period. Food price expectations came in second, declining 2.2%

Ultimately, expectations for lower prices can lead to consumers delaying the purchase of goods, which can lead to lower prices, which could lead to increases in available capital to be invested in risk assets like bitcoin and ether.

Ether price trends

Ether has shown increased momentum over the most recent five days. Its Relative Strength Index (RSI) has risen near 70. The RSI is a momentum indicator that can be used to identify both trends, as well as potential overbought/oversold conditions.

It ranges between 0-100, with 30 implying that an asset may be oversold, and 70 indicating that an asset may be overbought. It has breached the upper range of its Bollinger Bands in four of the last six days. An asset reaches the upper range of Bollinger Bands, is often interpreted as a bullish signal.

Year to date, ether has outperformed bitcoin, rising 5.4% versus the asset.

Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.

Source