Bitcoin traders are bracing for inflation-driven volatility as the cryptocurrency’s price action has held firm above a critical weekly support level of $82,500.
Bitcoin (BTC) is entering the third week of October by defending the $82,500 support mark, with key U.S. inflation data on the horizon.
Key Economic Indicators in Focus
This week, traders are closely watching U.S. inflation figures ahead of the Federal Open Market Committee’s (FOMC) interest-rate policy meeting on October 28. The September Consumer Price Index (CPI) and Producer Price Index (PPI) are scheduled for release on Wednesday and Thursday, respectively.
In August, the CPI registered a year-on-year increase of 3.4%, largely in line with expectations. However, markets are now anticipating an uptick to 3.7% this month, influenced by ongoing military conflicts in the Middle East and subsequent surges in fuel prices. The PPI is projected to show a 0.3% month-on-month increase, compared to 0.2% in August.
Historically, cryptocurrencies, stocks, and gold tend to perform well when inflation readings are lower than expected. Such outcomes reduce the likelihood of the Federal Reserve tightening its monetary policy, thereby encouraging capital inflows. Tim Waterer, chief market analyst at KCM Trade, highlighted the potential impact of a surprise downside surprise in CPI and PPI readings on gold prices and U.S. bond yields.
“In the short term, a cooler-than-expected U.S. inflation reading would be the clearest near-term catalyst, as it would reduce the odds of further Fed tightening and ease pressure on real yields,” Waterer told Reuters.
Current market sentiment, as indicated by CME FedWatch, suggests an 18.8% probability of a rate hike at the October 28 meeting, which would move the federal funds rate from its current 3.75-4.00% range. The subsequent meeting in December shows a higher probability, with markets assigning a 70.6% chance of a 25-basis-point hike to 4.00-4.25%.
Geopolitical Developments and Market Reactions
Federal Reserve Chair Kevin Warsh is scheduled to participate in a discussion with Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), at an event in Bangkok, Thailand, on Friday.
U.S. bond yields have retreated from 24-year highs reached last week. On Monday, the 10-year Treasury yield stood at 5.24%, and the 30-year yield was at 5.60%.
Stock futures showed positive movement at the start of the week, with the S&P 500 index up 0.25% and approximately 30 points shy of its all-time highs.
An announcement by U.S. President Donald Trump regarding a deal to purchase 300,000 tons of diesel from Russia appeared to have a limited impact on oil prices, as the proposal faces growing bipartisan opposition. Trump also declared an “energy ceasefire” between Russia and Ukraine.
“Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Both parties have agreed,” Trump posted on Truth Social on Sunday. Ukrainian President Volodymyr Zelenskyy stated he was unaware of such an energy ceasefire.
West Texas Intermediate (WTI) crude traded around $91.50 per barrel on Monday, a 2% increase from its daily low of $89.60. Data from motorist group AAA indicated the average price of diesel at $6.26 per gallon, down from the all-time high of $6.52 recorded on September 22.
Tamas Varga, an analyst at PVM, commented to Reuters that Russia’s reduced export capacity made the impact of the diesel deal “questionable.” He added, “However, Moscow has partially lifted its ban on diesel exports, allowing 500,000 tonnes (around 3.7 million barrels) to be released onto the international market, equivalent to roughly one day of U.S. consumption and around 13% of global demand.”
Bitcoin’s Technical Outlook
At approximately $83,700 on Bitstamp, Sunday’s weekly candle close marked a 3.2% decline for BTC/USD over the past week.
Despite the weekly dip, the pair successfully maintained a crucial support level at $82,500 on weekly charts, thereby preventing a return to its prior long-term trading range between $60,000 and $80,000. As previously reported, $82,500 remains a critical line in the sand for Bitcoin bulls.
Last week, trader and analyst Rekt Capital noted that a weekly close above $82,500 would signify a “successful” retest of support. This could encourage investors to continue accumulating BTC at current levels, potentially paving the way for further upward movement, similar to Bitcoin’s recovery from its 2022 bear market.
In light of Bitcoin’s multiple retests of support following its initial breakout in July, trader and analyst Aksel Kibar has drawn parallels between the cryptocurrency and stock markets. Since May, the S&P 500 has undergone several retests of key levels, first at 7,300 points and subsequently at 7,600 points.
Kibar suggested in an X post on Sunday that Bitcoin might be experiencing a “hard retest” of support, implying that BTC/USD could trend higher if these retests continue to prove successful.
