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Bitcoin's Price Climbs After ETF Approval, Markets Await U.S. CPI Data

Bitcoin’s Price Climbs After ETF Approval, Markets Await U.S. CPI Data

Following an initial delay on January 9, the United States Securities and Exchange Commission (SEC) officially approved spot Bitcoin ETFs on January 10. This sanction came shortly after reports surfaced about Cboe’s endorsement of the listing of spot Bitcoin ETFs. Consequently, by Thursday, Bitcoin’s price saw a significant surge, crossing the $47,000 benchmark.

BTCUSD Daily Chart

SEC Greenlights Bitcoin ETFs

Bitcoin has recently been on a wild ride, with its price experiencing dramatic fluctuations. This volatility comes in the wake of the US Securities and Exchange Commission (SEC) approving several spot bitcoin exchange-traded funds (ETFs) on Wednesday. Spot bitcoin ETFs are financial instruments that many investors believe could pave the way for mainstream capital to flow into the cryptocurrency market.

The SEC’s stamp of approval was given to ETF applications from some of Wall Street’s biggest players, including BlackRock (BLK) and Franklin Templeton (BEN). Heavyweights like JPMorgan Chase (JPM) and Goldman Sachs (GS) have offered their services to these asset managers to assist in the creation and redemption of shares for their newly minted bitcoin-based funds. Most of these ETFs are expected to kick off trading on Thursday, according to issuers.

A Word of Caution from the SEC

Despite the SEC’s approval, it is crucial to note that this does not equate to an endorsement of bitcoin. SEC Chair Gary Gensler clarified this in a statement on Wednesday, emphasizing that his agency “did not approve or endorse bitcoin”. He further cautioned investors to be mindful of the various risks associated with bitcoin and any products whose value is tied to cryptocurrency.

Bitcoin Liquidations on the Rise

The SEC’s approval triggered a significant uptick in bitcoin price volatility. Over the past 24 hours, the digital asset saw a surge, peaking at nearly $48,000 (£37,675), before dropping back into the $45,000 range, and then bouncing back to currently trade slightly above the $46,000 mark.

These substantial price swings resulted in over $86m in liquidations of leveraged bitcoin (BTC-USD) positions on cryptocurrency exchanges, as per data from Coingecko. Of these liquidations, the lion’s share – approximately $51m – was made up of long positions.

Understanding Liquidations in Volatile Market Conditions

Liquidations typically happen during volatile price swings when prices either skyrocket or plummet. In such market conditions, there is usually a flurry of buying or selling activity.

The bulk of the liquidations over the past 24 hours were long positions held by derivatives traders who were banking on the cryptocurrency’s value to climb. However, the sudden market dip forced them to sell at a loss to mitigate further losses.

EUR/USD Analysis: Anticipating CPI Data

EUR/USD was experiencing a consolidation of gains below the 1.10000 mark in the early hours of European trading on Thursday. A risk-on market mood ahead of the US Consumer Price Index (CPI) data release is supporting the pair as the US Dollar faces challenges.

EURUSD Daily Chart

Bullish Momentum and Resistance Areas

After a subdued European session, the EUR/USD pair gained bullish momentum in the latter half of the day, ending Wednesday’s trade in positive territory above 1.0950. The pair maintains a steady position early Thursday, trading within a close range of the 1.0990-1.1000 resistance area.

Impact of Risk Mood and Inflation

A positive risk mood led to selling pressure on the US Dollar (USD) during American trading hours. Wall Street’s main indexes continued their upward trend after opening with marginal gains, causing the USD Index to retract a significant portion of Tuesday’s gains. Inflation in the US, as demonstrated by the CPI, is predicted to marginally increase to 3.2% annually in December from 3.1% in November.

Prediction for CPI and EUR/USD

The Core CPI, excluding volatile food and energy prices, is expected to rise 0.3% monthly, similar to November’s reading. A smaller-than-expected increase in the monthly Core CPI could further pressure the USD and aid EUR/USD in extending its rebound. Conversely, a higher core inflation figure could bolster the USD.

GBP/USD Analysis: Awaiting Inflation Data

GBP/USD was holding onto gains above 1.2750 during European trading hours on Thursday. A generally weaker US Dollar and risk flows are assisting the pair’s progress. Market participants eagerly await the US Consumer Price Index data for December for new momentum.

GBP/USD Daily Chart

Reaction to Market Mood

The pair entered a consolidation phase above 1.2750 early Thursday after closing positively on Wednesday. Although the optimistic market mood is helping the pair maintain its position in the European session, investors might refrain from making sizable moves ahead of the much-anticipated US inflation report for December.

Wall Street’s Influence and CPI Expectations

Wall Street’s main indexes gained bullish momentum mid-week, making it challenging for the US Dollar (USD) to attract demand. The Consumer Price Index (CPI) data for December will be released by the US Bureau of Labor Statistics. Investors are likely to react to the monthly Core CPI reading, which isn’t distorted by base effects and excludes volatile food and energy prices.

Predictions for Core CPI and GBP/USD

The Core CPI is forecasted to rise 0.3% monthly in December, matching November’s increase. A weaker-than-expected core inflation figure could revive expectations of a Federal Reserve policy shift in March and compel the USD to continue weakening against its rivals. Conversely, a stronger-than-expected rise in the Core CPI could make markets more cautious and impede GBP/USD’s ability to build on Wednesday’s gains.

Gold Price Analysis: Waiting for Inflation Figures

Gold price (XAU/USD) was attracting some bids on Thursday, maintaining its bid tone during the first half of the European session, although it remains below the $2,040-$2,042 resistance zone. The US Dollar (USD) is trading with a slight negative bias within a familiar range over the past week due to uncertainty over the Federal Reserve’s rate-cut path.

XAUUSD Daily Chart

Impact of Fed Policy and Treasury Yields

Investors have been reducing their expectations for a more aggressive policy tightening by the Fed, given the resilient US economy. This supports elevated US Treasury bond yields and restrains bulls from placing fresh bets on the non-yielding Gold price.

Anticipation for Consumer Inflation Figures

Investors seem hesitant and prefer to wait for the US consumer inflation figures, due later today, for clues about the Fed’s future policy decisions. These figures will influence USD demand and determine the near-term trajectory for XAU/USD. Gold buyers will be keen to see softer data.

Crude Oil (WTI) Daily Chart

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.