Bitcoin Recovery Faces Challenges as Inflation Report Looms

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This week commenced optimistically for Bitcoin investors and owners, as they aimed to move past the troubles experienced in the previous week. From Monday onwards, the asset exhibited promising signals and has since registered substantial gains that have enabled it to break free from its struggle near $90,000. The 24-hour volatility stands at 3.2%, while its market cap is approximately $1.97 trillion, with a trading volume of $53.04 billion over the past 24 hours.

Inflation Data Raise Concerns for BTC’s Next Move

Although the indicators suggest otherwise, there are lingering questions in the market about Bitcoin’s ability to maintain its recent growth, let alone increase it further.

The concerns grow increasingly obvious as the economic world anxiously looks forward to the upcoming U.S. inflation figures, set to be released later on today.

Just as anticipated, a less-than-favorable inflation report could pose challenges for Bitcoin and numerous other digital currencies.

At 13:30 UTC, we’ll receive the latest inflation report detailing changes in the cost of living for December. Experts anticipate a monthly increase of approximately 0.3%, mirroring November’s numbers, and an annual rise to around 2.9%, slightly higher than the 2.75% reported last month. Additionally, core inflation, which excludes food and energy costs, is expected to climb by 0.2% monthly and 3.3% yearly.

Stablecoin Supply Stagnates, Adding Pressure

Besides the U.S. inflation figures, another aspect causing uncertainty about Bitcoin’s prolonged growth seems to be the supply of prominent stablecoins. Data from Glassnode suggests that the supply of these stablecoins might have plateaued, implying a lack of significant new investments into the market.

Over the past month, the collective supply of the four most prominent stablecoins hasn’t experienced substantial changes. At present, their combined value hovers around $189 billion, with a minor rise of approximately 0.37% observed during this period.

In contrast to the significant changes seen in the stablecoin market towards the end of 2024, there has been minimal fluctuation in stablecoin liquidity as of now. This observation was made by Glassnode and shared in a Telegram post.

Last year between November and December, approximately $27.3 billion flowed into the market as new investments. This significant influx of funds was sufficient to fuel Bitcoin’s rise from around $70,000 to over $108,000.

When considering comparisons, it’s worth mentioning that the year 2024 might also be relevant. Back in the first quarter of that year, Bitcoin saw inflows totaling approximately $14.68 billion, which contributed to its impressive 70% increase and eventually pushed its value up to around $70,000.

At present, the path for Bitcoin and the broader cryptocurrency market is not clearly defined. Yet, an optimistic inflation report and additional investment in the stablecoin sector could potentially improve its prospects, positioning it for continued growth.

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2025-01-15 17:13