FX.co ★ Crypto investors await US inflation data

Monday's breakout of the $42,000 mark led to a drop in the value of the main crypto asset below $40,000. However, this mirror level has resisted today, which enabled bitcoin to rebound from it

As you can see, the March recovery was short-lived. In April, the quote came under pressure again. Investors try to avoid risk by fleeing to safe-haven assets. Over the past two days, the cryptocurrency market has lost a staggering $170 billion in capitalization.

The main concern of market participants is still growing inflationary pressures, and the Fed is ready to tighten market liquidity by raising interest rates.

In this case, the correlation between cryptocurrency and the stock market comes to the fore.

Market experts believe that a reduction in the central bank's balance sheet is putting downward pressure on stocks and risky assets. Against this background, bitcoin is also losing its potential attractiveness. The Fed's monetary policy tightening has been called serious headwinds as the regulator's actions may affect BTC's price trend in the coming months.

Crypto market could plunge by June

According to Arthur Hayes, the co-founder of crypto trading platform BitMEX, the biggest cryptocurrency may slump by June 2022 due to its tendency to move in tandem with the Nasdaq 100 index. He expects the Nasdaq 100 to hit 10,000 or even lower. This will certainly affect the cryptocurrency market.

"The inconvenient truth that haunts crypto at this current juncture is that crypto moves in lockstep with the debt-based, un-free risk asset markets like global developed market equities. This is despite all the hard work of Lord Satoshi's loyal supplicants, who are fighting to create a counter-narrative grounded in technological truth," Arthur Hayes noted.

The head of BitMEX expects BTC to hit $30,000 and ETH to reach $2,500 by the end of June 2022.

Market drawdown may create buyback opportunities

According to market data platform Santiment, there is growing FUD (fear, uncertainty, and doubt) in the crypto market, especially around ether. The company also notes that this could create some buyback opportunities.

"There is a whole lot of #bearishness circulating in #crypto circles as market caps continue to drop following the incredible March. #Ethereum, in particular, has seen a ton of #FUD even prior to its price rally, and #buythedip opportunities may arise," Santiment said.

The cryptocurrency market has been inefficient in the last few months. Since reaching an all-time high of $69,044 in November 2021, bitcoin has lost over 40% of its value.

The total crypto market capitalization has hit a record high of $3 trillion in November but is currently around $1.8 trillion. Bitcoin and the broader cryptocurrency market have been lagging behind in recent months, and this trend may continue for some time.

Threat of rising inflation

In the coming days, the focus of investors will be on data on consumer prices in the United States.

The US inflation rate is expected to exceed 8%. On Monday, April 11, White House spokeswoman Jen Psaki said that March inflation figures could be extremely high due to sanctions against Russian energy supplies.

According to market expectations, the inflation rate could advance to 8.4%, the highest level in four decades. However, if the actual figure turns out to be higher, the crypto market may enter a sharper correction as the equity market and risk appetite come under pressure.

Technical analysis

Today, the crypto market is at a crossroads again. The movement of the BTC/USD pair was limited by the support level of $40,000 per coin. For now, it is cautiously bouncing up from it.

Notably, in anticipation of US inflation data as well as amid global instability and low volatility, the local scenario is as follows: BTC may either recover in the range of $40,000 - $42,000 or break through the $42,000 level.

Alternatively, the asset may first decline to $37,000 per coin and then approach January lows near $35,000.