5 min read Bitcoin is rising towards $80,000 despite a risk-off move across broader financial markets amid escalating tensions in the Middle East and oil reaching $100 a barrel.
Bitcoin trades 1.5% higher over the past 24 hours at $79,600. Ethereum trades 1.8% higher above $2,500, while the broad crypto market cap is up 1.3% at $2.71 trillion.
The crypto Fear and Greed Index has risen to 74, moving further into greed territory from 72 yesterday.
Interestingly, sentiment towards crypto is improving even as Brent crude has risen above $100 a barrel for the first time in six weeks amid escalating tensions in the Middle East, raising inflationary concerns ahead of next week’s FOMC meeting.
U.S. stocks are under pressure, extending losses for a third straight session, while the U.S. dollar is also coming under pressure.
It would appear that Bitcoin is rising as investors look to diversify investments beyond the dollar ahead of the Treasury Department’s long-dated bond buyback operation starting on Thursday. The department is expected to announce the size of the buybacks at 11:00 ET.
When the Treasury Department initially announced the plan last month, markets responded positively, with Bitcoin surging above $80,000 on the prospect of increased liquidity, while the USD dropped.
Inflation data and the Fed in focus
However, today’s clarification over the quantity is unlikely to have the same impact, although it could provide some support to BTC. However, gains could be limited by caution ahead of tomorrow’s PPI and Friday’s CPI data, the final pieces of the inflation puzzle ahead of next week’s FOMC rate decision.
Hotter-than-expected inflation could lift Treasury yields and hawkish Fed expectations, weighing on BTC and other risk assets. However, cooler-than-expected data could ease pressure on yields and Fed expectations, potentially allowing Bitcoin to rally meaningfully above $80,000.
Bitcoin ETFs are also offering support. According to SoSoValue data, Bitcoin ETFs have recorded $723 million worth of net inflows so far in September, putting institutional demand on track for its third straight positive month after notable weakness in May and June.
Persistent institutional demand could provide further support for BTC, particularly if macro conditions become more favourable.
Bitcoin Golden Cross
Technically, the picture for Bitcoin is also becoming increasingly interesting, as the 50 EMA is set to cross above the 200 EMA. If this occurs, it would form a golden cross, a bullish technical signal.
On previous occasions, a golden cross for BTC was followed by gains of 50%, 45% and 60%, although the pattern does not guarantee another rally.
Currently, BTC is consolidating below the $80,000 level. A confirmed daily close above $82,500 would open the door towards $90,000 and potentially $100,000.
On the downside, sellers would need a break below $76,000 to open the door towards the 200 EMA at $73,000.
The key question for Bitcoin is whether the combination of institutional inflows, dollar weakness and expectations of increased liquidity can outweigh renewed inflationary pressure. A cooler CPI print could provide the catalyst for BTC to break above $80,000 and confirm the bullish technical setup, while hotter inflation would risk pushing yields higher and limiting the upside.
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