Bitcoin (BTC) Price Bounces Above $81,000 as Market Looks to Regain Poise

The crypto market is looking to regain poise, with bitcoin bouncing above $81,000 ahead of tomorrow's U.S. inflation report. By Omkar Godbole.

output: The crypto market is showing signs of resilience, with bitcoin recovering above $81,000 ahead of tomorrow’s U.S. inflation report.

The recovery, largely seen in layer-1 and layer-2 coins as well as gaming tokens from their overnight lows, comes amid indications of "peak fear" on Wall Street, a dynamic typically observed at market bottoms.

Interestingly, the spread between one- and six-month futures tied to the VIX, Wall Street’s so-called fear gauge, crossed above zero on Monday, signaling a rare positive reading and reflecting expectations for greater volatility in the short-term than six months out. Volmex’s Bitcoin volatility index shows a similar inversion, although that is more common in the crypto market.

“Is the worst behind us? It’s impossible to say. However, the risk-reward for entering long positions in U.S. stocks is improving. The VIX index for volatility is now significantly inverted, meaning near-term contracts are priced higher than long-term ones. This is an important sign of stress, but it can also indicate extremes in sentiment.” Ilan Solot, senior global market strategist at Marex Solutions, said in an email.

Meanwhile, bullish positioning in the yen appears stretched, suggesting the haven currency’s rally may soon lose steam, potentially providing relief to risk assets in the process.

The Truflation U.S. Inflation Index, which offers a daily, real-time measurement of inflation based on data from over 30 sources and 13 million price points, has dropped to 1.35%, extending a decline from February’s high of over 2%. This trend hints at the progress on inflation the Federal Reserve is considering before potentially cutting rates.

On Wednesday, the Bureau of Labor Statistics is expected to show a month-over-month increase of 0.3% for February. This would be a notable deceleration from January’s concerning 0.5%. A soft reading could validate traders’ expectations for rapid rate cuts starting in June, possibly leading to renewed risk-on sentiment.

However, it’s crucial to note that Chairman Jerome Powell has indicated the Fed is awaiting clarity on President Trump’s policies before making its next move, suggesting that soft CPI data alone might not be enough.

On the other hand, a hotter-than-expected CPI print could derail recovery prospects, potentially setting the stage for a deeper slide in bitcoin and the broader crypto market. Some analysts, like Alex Kuptsikevich, senior market analyst at FxPro, predict a pullback to the $70,000 to $74,000 range.

“A bearish pattern persists on the daily timeframes, indicating a strengthening sell-off after failing to hold above the 200-day moving average. The scenario of a pullback to the $70,000 to $74,000 range still looks most probable.” Kuptsikevich said in an email.