Bitcoin Consolidates Amidst Inflation Concerns and Weakening Futures Data
Bitcoin (BTC) is currently trading around $107,000 on Friday, following the release of the Personal Consumption Expenditures (PCE) price index data for May. The PCE rose to 2.7%, exceeding expectations of 2.6%. This higher-than-anticipated inflation figure could lead to a continued slowdown in Bitcoin trading activity, as spot and futures volumes have already been declining, signaling a decrease in investor appetite.
US Inflation Data Exceeds Expectations
The core PCE data for the U.S. in May surpassed expectations, increasing by 2.7% year-over-year. Month-over-month, the core PCE rose by 0.2%, above consensus, while the overall PCE increased by 0.1%.
This rise in inflation may prompt the Federal Reserve (Fed) to maintain its “wait-and-see” approach, as the PCE is the preferred inflation measure for policymakers. This aligns with Fed Chair Jerome Powell’s testimony before the House Financial Services Committee on Tuesday, where he emphasized that policymakers remain cautious about rate cuts, considering the potential inflationary impact of tariffs on the economy.
Despite a slight dip in the broader cryptocurrency market following the release of the somewhat restrictive inflation data, Bitcoin has remained stable above $106,000.
Network Activity Slows Down
The leading cryptocurrency has continued to trade within the $100,000 to $110,000 price range amidst a slowdown in network activity. Data from Glassnode indicates that transfer volumes have fallen from their May peak of $76 billion to $52 billion in the past week.
“Currently, the market appears to be in a cooling phase after the third significant wave of profit-taking, indicating that while substantial gains have been secured, momentum is now decelerating as realized profitability diminishes,” Glassnode noted in a recent report.
This cooling in Bitcoin’s momentum has been accompanied by declines in spot and futures trading volumes, suggesting a lack of speculative appetite among investors.
Spot and Futures Volumes Decline
Glassnode reported that spot volumes remain at $7.7 billion despite Bitcoin’s rise to $111,000, which is significantly lower than the volumes seen during previous rallies in the second and fourth quarters of 2024.
Futures volumes have experienced a similar decline in recent weeks, with market participants showing less enthusiasm compared to the all-time high rally in the first quarter. The drop in futures volume was further driven by a decrease in the annualized funding rate and the 3-month futures basis. This decline indicates a reduced desire to hold long positions.
“This points to a more cautious and less conviction-driven speculative environment,” Glassnode stated.
Analysts at Glassnode suggested that traders might be exploiting price differences between Bitcoin futures and spot markets to secure low-risk profits, rather than making directional bets on price increases.
Key Support Levels to Watch
Despite the decrease in volume, analysts noted that Bitcoin remains in a bull market if it maintains support between $93,000 and $100,000—a key level that has seen high investor activity. However, a move below this support could trigger a deeper market correction, “especially if holders with a cost basis in this zone begin to capitulate and add selling pressure,” Glassnode warned.
At the time of writing, Bitcoin is changing hands at $107,050, down 0.5% on Wednesday.
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