Bitcoin Drops Below $17k Pre CPI, Scenarios To Prepare For

News BTC

A week could not be more important for Bitcoin and the broader crypto market! On Tuesday, at 08:30 ET, there will be the release of the Consumer Price Index (CPI).

Just one day later, on Wednesday, December 14 at 14:00 ET, the Federal Open Market Committee (FOMC) will hold its last meeting of the year. For the fourth time this year, there will be an updated forecast for inflation and interest rates (dot plot).

How To Get Free Crypto  

Generally, there is a simple base case scenario: if the numbers are better than expected, there will be a rally for risk-on assets like Bitcoin. If the CPI falls short of expectations, Bitcoin could face a new bear market low.

Get 30 FREE SPINS at Punt Casino – NO DEPOSIT REQUIRED! Start Playing Now.
5 BTC + 300 Free Spins for new players & 15 BTC + 35.000 Free Spins every month, only at mBitcasino. Play Now!

Did Bitcoin Overreact To The PPI?

To assess how likely both scenarios are, it is also worth looking back at the recent producer price index (PPI) release. The PPI was higher than expected.

However, expectations were relatively high. The core PPI was forecast at 7.2% in October, but actually fell to 6.7%, a 0.5% month-to-month decline.

The core PPI November forecast was 5.9%. In reality, though, the PPI came in at 6.2%. While this looks bearish at first, it really wasn’t. This still represented a 0.5% decline month-over-month.

Coinbase Banner  
BitStarz Player Lands $2,459,124 Record Win! Could you be next big winner?

The PPI shows the same story. The value fell for two consecutive months, 0.5% and 0.6%. The expectation was a 1.1% decline in one month, which was extremely unrealistic.

The markets’ projected target was an extremely low number, and the failure to meet that expectation was, in a sense, an overreaction. Inflation has continued to fall significantly, just less than less than expected.

Ultimately, expectations were a bit out of touch with reality. In addition, the PPI is fundamentally more volatile than the CPI, and also fluctuates seasonally. With the Christmas and gift-giving season, fluctuation is not uncommon.

A Game Of Expectations

So what are the expectations for the CPI? CPI fell 0.5% in October to 7.7%, while 8.0% was predicted. Tuesday’s expectations are now 0.4% lower. The forecasted CPI is 7.3%.

FreeBitcoin Banner  

Core CPI is expected at 6.1%, which would represent a 0.2% decline. The October reading was 6.3%, while the expectation was 6.5%, creating a positive surprise.

The forecast for the CPI and the Core CPI are thus much more moderate and less unrealistic than for the PPI. Unlike the PPI, there are no extremely high expectations.

Even a “small” surprise could be enough to turn the market bullish. In a best-case scenario, we see a number of around 7% for the CPI on Tuesday.

Moreover, a renewed drop in the CPI could confirm that inflation peaked. If the CPI falls for the sixth month in a row, fears of a second wave of inflation would also be allayed for now.

All Eyes On The FOMC Meeting

Last but not least, the CPI numbers will be quite crucial for the FOMC decision on Wednesday. The market has priced in a 78% probability that the Fed will slow the pace of rate hikes to 50 basis points at that meeting.

However, the words spoken at the FOMC press conference are likely to be even more important, as well as the forecasts of updated economic projections.

For the first time since September, the market will see an updated dot plot, an extremely important piece of information, as NewsBTC reported.

Banking giant ING, meanwhile, laid out some potential scenarios that could put the market in risk-off or on mode. ING’s base case is that the Federal Reserve will hike rates by 50 bps, with 5% end 2023.

As the monetary policy works with long & varied lags, ING expects a slowdown in future rate hikes, and clear cuts in 2024. This scenario could provide the bulls with the powder they need to start a rally.

ING scenarios for December 14 FOMC meeting. Source: Twitter

At press time, the Bitcoin price dropped to $16,920 in Monday morning trading in Asia.

BTC price, 4-hour chart. Source: TradingView

Go to Source
Author: Jake Simmons

Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

This site uses Akismet to reduce spam. Learn how your comment data is processed.