Bitcoin Price (BTC) loses 9.3% of its value in the last three days dropping below US $23,000. On Tuesday the bureau of labor and statistics revealed the latest CPI data for Jan 2023. According to the data inflation in the United States started rising again after a pause.
Another factor, contributing to the current pullback is the $1.9 Billion options expiry of Bitcoin. The options expiry is due today as of 24 Feb 2023. In this article, I will explain the effect of inflation, Options expiry, and current price analysis of bitcoin.
Bitcoin Current Price Analysis
Bitcoin faced rejection exactly from the resistance discussed earlier this week. According to the data from Tradingview Bitcoin (BTC) is trading at $23000 at the time of writing this.
Traders are eyeing $22500 and $21600 as strong support amid options expiry, I will explain this in a bit.
The United States Consumer Price Index (US CPI)
Consumer prices rose more than forecast during January, a potentially negative sign of what will happen to risky assets like cryptocurrencies in 2023. While the Federal Reserve attempts to overcome inflation through an interest rate hike campaign started in march 2022.
The Bureau of Labor Statistics (BLS) reported on Tuesday that the Consumer Price Index (CPI), which tracks price changes for a wide range of goods and services, increased 6.4% in the twelve months ending in January, above estimates of 6.2%.
The inflation reading on Tuesday was the seventh straight to indicate a decline in inflation after it reached a 41-year high of 9.1% in June. According to the report from last month, prices decreased by 0.1% in December, lowering the annual inflation rate to 6.5%.
The prices increased by 0.5% in January for all items. Food, fuel, and housing saw the highest monthly CPI increases, accounting for roughly half of January’s inflation.
This news created a big fear among investors as investors are concerned that the Fed may raise interest rates more aggressively, which means may be at the rate of 0.5 bps to 0.75 bps next month.
According to the data from Coinglass, the monthly options expiration on February 24 has $1.91 billion in open interest, but the actual amount will be less because bears anticipated prices are below $23,000. Yet, these traders were shocked when Bitcoin increased more than 13% between February 15 and February 16.
However, the markets usually remain volatile on Friday because of the weekly closing in financial markets. When it is combined with options expiry, this shakes a lot of weak hands and causes a cascading sell in the market.
“Bitcoin Options is a financial contract known as an option that gives you the right to purchase or dispose of an asset at a certain price. Unlike futures contracts, however, you have the choice of whether to exercise it. You are not required or expected to carry out the deal.”
“The open interest is the total number of active futures and options contracts or commitments on an exchange at any given moment.”
The major reason for the market drop is the rejection of the 50 weekly moving average as the 50 weekly moving average is one of the biggest indicators of a market reversal. This is also the early indicator of the bull market. This pullback is not a big surprise for traders.
In addition, the US inflation rate created fear that FED may come with a more aggressive interest rate hike in March 2023.
Image from: Tradingview, Coinglass, BLS, and Siam Blockchain