Market Wrap: Bitcoin Trades Higher Amid Muted Expectations for Next Inflation Reading

Price Action

The two bellwethers within the crypto landscape traded higher on Wednesday as bitcoin and ether rose 0.42% and 1.34%, respectively.

Bitcoin (BTC) trading volume continues to fall below its 20-day moving average, highlighting a decline in activity. The trend also indicates that markets will continue to trade in a range for the foreseeable future. BTC began the 13:00 UTC (9:00 a.m. ET) hour testing $19,150 before reverting to its current level.

BTC’s price is down 1.65% thus far in October, indicating the overall lack of volatility. Historically, October has been a strong month for BTC daily returns, previously averaging a 0.57% daily gain, dating to 2014.

Ether (ETH) was recently changing hands at just below $1,300, a more than 1% gain. Volume once again fell short of its 20-day average, marking the 12th consecutive day this has occurred. ETH may find difficulty moving past current levels, as puts (i.e., the option to sell ETH) exceed calls (the option to purchase ETH), by two to one at the $1,300 strike price.

In broader crypto markets, the CoinDesk Market Index (CMI), a broad-based market index that measures the performance of a basket of cryptocurrencies, fell 0.90%.

Macro View

In macroeconomic news, investors will be eyeing Thursday’s CPI report, which is expected to show annual inflation increasing 8.1%. “Core” inflation, which excludes volatile food and energy prices, is expected to increase to 6.4%.

Oil prices are likely to increase following OPEC’s decision last week to reduce oil production. A rift between the U.S. and Saudi Arabia could create additional ripples in energy markets.

Inflation stems from an increased money supply, but higher energy prices resulting from lower oil supply also contribute to rising prices.

Higher inflation will likely lead to the U.S. central bank continuing its recent policy of steep interest rate hikes, slowing economic growth and curbing demand for riskier assets, including cryptocurrencies.

OPEC’s decision to reduce production signals the organization is protecting itself against an expected slowing of the global economy. Much of Europe is already in recession or nearing one. On Wednesday, Great Britain reported its economy declined 0.3% in August, versus expectations for a 0.1% expansion.

Latest Prices

● CoinDesk Market Index (CMI): 940.65 +0.5%

● Bitcoin (BTC): $19,136 +0.6%

● Ether (ETH): $1,297 +0.9%

● S&P 500 daily close: 3,577.03 −0.3%

● Gold: $1,681 per troy ounce +0.1%

● Ten-year Treasury yield daily close: 3.90% −0.04

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Technical Take

BTC Trades in Narrow Range on Eve of Inflation Report

BTC followed a familiar theme on Wednesday, trading in a narrow range on low volume ahead of macroeconomic data.

BTC’s daily chart shows an “inside day,” which is when the current day’s high price dips below the previous day’s while the current day’s low price is higher than the prior day’s.

Wednesday’s price range falls completely within Tuesday's. An inside day can signal uncertainty from market participants specific to price direction. This is also the second inside day within the most recent seven days because it occurred on Sunday as well.

The ongoing lack of volatility and price direction leaves little room for traders who look to profit from price movement. Traders may find some hope in long bouts of low activity because increased price turbulence often follows. How long the activity remains slow remains uncertain.

Currently, derivative markets imply that insurance is being purchased on both sides of the market. Spikes in purchased call options are seen at the $19,250 and $20,000 strike prices, while similar spikes in purchased put options are present at the $19,000 and $18,500 strike prices.

There is no discernible trend within BTC’s chart other than sideways at the moment. Traders with a bearish bias who lean on chart patterns, however, may identify the formation of a “descending triangle” between Oct. 4 and Wednesday.

A descending triangle is a technical chart pattern that is often interpreted as bearish. It occurs when investors are willing to sell at increasingly lower lows, with diminished demand to meet the falling prices.

The 10-day moving average for BTC recently crossed below the 20-day moving average, which would be considered bearish as well. Still, the lack of volume implies a wait-and-see approach, despite the signs of downward pressure.

Altcoin Roundup

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CoinDesk Market Index

Biggest Gainers

Asset Ticker Returns DACS Sector Terra LUNA +11.38% Smart Contract Platform Celsius CEL +11.11% Currency Numeraire NMR +8.69% DeFi

Biggest Losers

Asset Ticker Returns DACS Sector Rally RLY -7.9% Culture & Entertainment Maker MKR -6.46% DeFi XYO XYO -6.01% Computing

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure the market capitalization weighted performance of the digital asset market subject to minimum trading and exchange eligibility requirements.