Inflation data released recently has clearly shook up the market.
In context, the February PPI released on 18th March was hotter than anticipated, signaling that U.S. inflation is still sticking. It was an almost immediate reaction. Many traders were surprised when gold, for example fell by 3.74%. It broke the support level of $5k.
This logic is simple: Investors have historically flocked into emerging markets during periods of geopolitical instabilities. gold As a hedge against the inflation. What’s fascinating is the fact that it seems like this pattern has changed. Although this trend has not yet spilled into the crypto world, it doesn’t necessarily mean that a crash will never happen.
In order to see the reasons, it is important that you consider two key points.
The gold price is decreasing because the dollar has become stronger. The Fed is keeping rates stable. U.S. debt now over $39 trillionTreasury yields look more and more attractive. Since the start of the war, Treasury yields are up nearly 10%, and this is clearly causing people to look away from gold.
The crypto-side of history is a well-known story. A stronger DXY usually means less love for risk assets. Risk assets become less attractive when tensions in geopolitics increase. A stronger dollar also encourages investors to invest in bonds. These are perceived as safer, and offer better returns due to their rising yields.
The falling leaves are a good example. Coinbase Premium Index CPI has already hinted at the shift and explains why gold could be followed by crypto.
Bitcoin Shorts on the Rise: Has a crash in crypto already been priced-in?
Uncrowded trades in volatile markets are a double edged sword.
Cryptocurrency is currently forced to chop in a small range. Bitcoin [BTC] There are no large capital flows in the near future. Liquidity clusters at various price levels are accumulating, indicating that traders may be preparing for an upcoming move.
This is a good place to start. Glassnode data The directional premium is bearish, as perpetual funding shows. Even though BTC bounced back from the lows traders still have a short bias, keeping the market ready for an upside squeeze.
Here’s the interesting part: Gold has recently sold off, adding a new twist that shows just how volatile gold can be. exposed the crypto market still is. The rising rates of return are causing capital to flow back into the traditional safe-havens. Federal Reserve brushing off Any talk of interest rates being cut, Crypto traders will be left to navigate a complicated setup.
The rising Bitcoin shorts are not a coincidence in this context.
It’s more of a strategic position. The Coinbase Premium Index is falling. There are limited inflows of capital. BTC has been stuck at resistance. And the macro-background keeps changing. All this points to both a technical and fundamental bearish bias. Bottom line? Crypto crash is already priced in. historical DXY-BTC correlationIt would not be surprising to see the same thing happen again.
Final summary
- A rising DXY and higher yields are driving capital away from gold into other safe-havens.
- A crypto crash could be already priced in, with Bitcoin at resistance and CPI falling, as well as bearish technicals.
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Source: ambcrypto.com
