Key Points
- The release of the US Consumer Price Index (CPI) could impact Bitcoin price, possibly hurting short sellers.
- A strong rise in the Japanese Yen against the US Dollar could potentially affect Bitcoin’s price recovery.
Crypto traders are keenly awaiting the US Consumer Price Index (CPI) release scheduled for Wednesday. The price of Bitcoin currently stands at around $56,700, as traders hold off on making any significant moves.
An analyst in the crypto space suggests that if the US inflation data is lower than expected, it could boost optimism among Bitcoin traders. This is in anticipation of the Federal Reserve’s rate cut scheduled for next week. If Bitcoin’s price goes back to $60,000 levels, short liquidations worth $1.6 billion could occur, according to data from CoinGlass.
Short Sellers at Risk
Pav Hundal, lead analyst at Swyftx, recently stated that short sellers could be at risk of incurring losses. He believes that a classic short squeeze could trigger a rally. He told Cointelegraph that investor confidence remains high. He also mentioned that the year-on-year Consumer Price Index (CPI) is unlikely to surprise on the upside due to its calculation method.
Hundal also suggested that if the August CPI numbers are lower than expected, many investors might start expecting a larger rate cut next week. The chances of the Fed rate cuts are very high with 75% expectations of a 25 bps rate cut and 25% of a 50 bps rate cut coming from the US central bank.
On September 4, Federal Reserve Chair Jerome Powell reinforced this expectation, stating that “the time has come”. This statement came after July’s CPI report showed a 0.2% increase, following a 0.1% decline in June, according to data from the US Bureau of Statistics.
However, Hundl also warned that higher inflation would be a major surprise and could thus trigger a Bitcoin sell-off. “But the unimaginable keeps happening and if it does, you’d expect to see very heavy selling of risk assets,” he said.
Impact of the Yen’s Strength on Bitcoin
The Japanese Yen made strong progress against the US Dollar earlier today, with the JPY/USD pair surging to 140.7, the highest since the beginning of the year. This has raised concerns about another unwinding of the Yen carry trade similar to what happened on August 5 last month.
This might trigger another sell-off in risk-ON assets such as equities and Bitcoin. BitMEX CEO Arthur Hayes has flagged the possibility of yet another Yen carry trade unwinding.
