Today, March 31, is of utmost importance for the Bitcoin price for three reasons: the quarterly settlement day for Bitcoin options, the release of the Personal Consumption Expenditure (PCE) price index in the US, and the monthly close candle for BTC, which could herald a breakout from the bear cycle.
The former has already happened. At 8:00 am UTC (4:00 am EST), Deribit, the world’s largest crypto options exchange by trading volume and open interest, settled over $4 billion worth of Bitcoin options. The Bitcoin price fell below $28,000 on this occasion, recording a low of $27,512.
Pseudonymous analyst @52kskew stated that Deribit-driven selling occurred. However, decent supply support has been seen on Bitstamp and several other exchanges. The analyst shared the chart below and added:
Deribit CVD & Delta showing the price impact of option expiry. Typically, occurs when large options open interest is near expiry & books need to be balanced out (delta neutral or hedged).
Bitcoin Price Breaks Above $28,000 On Core PCE Data
As Bitcoinist reported earlier this week, the PCE released today at 8:30 am EST was the most important macro data point of the week. The PCE is the Federal Reserve’s preferred inflation metric. This second major event is now also on the books.
In an initial reaction, the Bitcoin and crypto markets reacted positively to the new inflation data. The US Bureau of Economic Analysis (BEA) announced that the annual rate of the core PCE price index was 4.6% in February, while the expectation as well as the previous reading was 4.7%.
This, Core PCE services excluding housing had the smallest increase in February since last July. The Core PCE rate on a monthly basis was reported at 0.3%, with the forecast at 0.4% and last reported as high as 0.6%.
In addition, US personal spending in February (MoM) was also reported at 0.2% (estimate 0.3%, prior 2.0%). Moreover, the US PCE price index for February (YoY) came out at 5.0% (estimate 5.1%, prior report 5.3%).
U.S. Feb. Core PCE Price Index (MoM): 0.3%, [Est. 0.4%, Prev. 0.5%]
U.S. Feb. Core PCE Price Index (YoY): 4.6%, [Est. 4.7%, Prev. 4.7%]
U.S. Feb. Personal Spending (MoM): 0.2%, [Est. 0.3%, Prev. 2.0%]
U.S. Feb. PCE Price Index (YoY): 5.0%, [Est. 5.1%, Prev. 5.3%]
— CN Wire (@Sino_Market) March 31, 2023
In principle, any slowdown in inflation is a positive sign and suggests that the aggressive tightening of monetary policy by the Federal Reserve over the past year is having at least a mild effect. Because of this, the Bitcoin price is also currently reacting bullish to the news.
However, the reaction is muted. While inflation is slowing, which is good for the financial markets, the economy is also slowing as shown by personal spending, which is bad and fuels fears of a recession.
Moreover, the slowdown in inflation cannot be considered good enough. 5% PCE and 4.6% core inflation are still far from a stable 2%. Nick Timiraos of the Wall Street Journal wrote via Twitter that core PCE inflation in February was +4.6% over the past 12 months, +4.9% over the past 3 months, and +4.5% over the past 6 months, annualized – showing the slow progress.
Core PCE inflation in February
+4.6% over the previous 12 months
+4.9% over the previous 3 months, annualized
+4.5% over the previous 6 months, annualized pic.twitter.com/YdokzmQI0B
— Nick Timiraos (@NickTimiraos) March 31, 2023
BTC Price Targets Key Monthly Close
Bitcoin traders should also pay attention to the monthly candlestick close on the Bitcoin chart. As Rekt Capital notes, BTC could break its multi-year downtrend and enter bullish territory again.
#BTC is only two days away from confirming a breakout of the Macro Downtrend
Historically, this has been a trend-defining breakout
Right now, we are witnessing history in the making$BTC #Crypto #Bitcoin pic.twitter.com/a8OXaS2jrk
— Rekt Capital (@rektcapital) March 30, 2023
At press time, the Bitcoin price was trading $28,172, trying break above the resistance at $28,150.
Featured image iStock, chart from TradingView.com