Bitcoin at $25K as Maker Price Index signals bearish

Bitcoin held resistance at $25,000 after wholesale inflation fell 0.1% month-on-month in February 2023, below analysts’ forecast of 0.3%.

The US producer price index rose 4.6% annually, down 1.1% from January 2023 and below analysts’ forecast of 0.8%.

Low Wholesale Inflation Keeps Bitcoin at $25,000

Following the PPI numbers, bitcoin held the $25,000 resistance level after recording its best four-day stretch since February 2021 that ended on March 14. Over the past four days, bitcoin peaked at $26,500 but has since declined to below $24,800.

The US Bureau of Labor Statistics releases PPI numbers during the second week of each month.

US producer price index | Source: YCharts

Unlike the consumer price index, which measures changes in prices for consumers, the PPI measures how much producers are paid to make finished goods. PPI is also known as wholesale inflation.

The so-called core PPI, excluding food, energy and business services, rose 0.2% in February 2023, down 0.3% from January 2023.

Retail spending fell 0.4% in February 2023, with the largest declines at department stores at 4%, furniture stores at 2.5%, food services at 2.2% and motor vehicle and parts dealers at 1.8%.

Credit Suisse fell 29% to below $1.60 in Swiss trading after investor Saudi National Bank said it would not commit any more money. The stock has since recovered, rising to $1.72 at press time.

Credit Suisse after PPI
Credit Suisse share price | Source: TradingView

The bank took down several other banking stocks, including JP Morgan, Wells Fargo and First Republic Bank.

Shares of First Republic declined 19% in premarket trading after Moody’s downgraded the firm for relying on funding from uninsured deposits and holding deposits from a narrow pool of industries.

Yesterday, the US Department of Labor announced that the CPI for February 2023 is projected to increase by 0.4% month-on-month and 6% annually, which matches Dow Jones’ forecast.

Federal Reserve likely to stay with 25 basis point hikes

Last week, the CME’s FedWatch tool raised the likelihood of the Fed raising interest rates by 0.5% at its next Open Market Committee meeting.

Federal Reserve Chairman Jerome Powell said the Federal Reserve could scale up the size and pace of future rate hikes needed to bring inflation back to 2%. Powell attributed the continued aggressive stance to a strong labor market with unemployment projected at just 3.6% in January 2023.

He said the Fed would use February’s PPI and consumer price index numbers and the health of the US job market to determine the size of its next rate hike.

“Investors believe that a 50 basis-point hike by the Fed is off the table for next week, and a worst-case scenario would be a 25 basis-point hike, and probably no more. Bitcoin … tapping into this sentiment. was able to do and move to risk on before all other assets,” said James Lavish of the Bitcoin Opportunities Fund.

The Federal Reserve uses monetary policy to restore the imbalance in supply and demand. Lower retail sales indicate that the Fed’s policy tightening has dampened demand. It raised interest rates to 4.5% in the past year to deal with loose monetary policy and Covid-19 supply chain snarls, which has boosted demand.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index, will be released on March 31, 2023. The PCE index captures changes in consumer behavior due to rising prices. A major area of ​​focus with the PCE Index is the cost of medical care.

The rate hike stunned Signature Bank and Silicon Valley Bank, which sold securities at huge losses to shore up liquidity. The Federal Deposit Insurance Corporation has taken over both.

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