Bitcoin Rallies as PCE Price Index Comes in Below Expectations

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Bit­coin rose 1.5% as U.S. Core Per­son­al Con­sump­tion Expen­di­ture Price Index for Oct. 2022 came in 0.1% low­er than ana­lysts’ esti­mates of 0.3%.

The PCE Price Index, which mea­sures changes in con­sumer spend­ing and is released month­ly by the U.S. Bureau of Eco­nom­ic Analy­sis, revealed that prices for goods and ser­vices rose 0.2% month-on-month in Oct. 2022. The so-called core PCE Price Index excludes food and ener­gy prices.

PCE Price Index of 0.2% Causes Bitcoin to Rally

Short­ly after the release of the core PCE Price Index, Bit­coin was up 1.5% in the pre­vi­ous 24 hours to cross the psy­cho­log­i­cal $17,000 mark before falling to $16,988.

BTC/USD
BTC/USD | Source: Trad­ingView

The world’s largest cryp­tocur­ren­cy con­tin­ued a ral­ly that start­ed after Fed chair Jerome Pow­ell hint­ed in a Nov. 30, 2022, speech that the cen­tral bank could slow down its inter­est rate hikes at the next meet­ing of the Fed­er­al Open Mar­kets Com­mit­tee in Dec. 2022.

“It makes sense to mod­er­ate the pace of our rate increas­es as we approach the lev­el of restraint that will be suf­fi­cient to bring infla­tion down,” Pow­ell said.

Ethereum was also up rough­ly 0.3% to trade at $1,268.49 at press time, with Solana rack­ing gains of 1.2% before falling back to 0.5%.

Crypto heatmap
Source: Coin360

The S&P 500 increased by 5.38%, and the Dow Jones Indus­tri­al Aver­age rose by 5.67%. The Dow lat­er fell by 400 points in antic­i­pa­tion of U.S. employ­ment data, due for release on Dec. 2, 2022.

PCE Price Index paints a broader picture of macroeconomic conditions

The lat­est PCE data also revealed that the core PCE Price Index was up 5% from a year ago, com­pared to a year-on-year increase of 5.2% in Sep. 2022.

PCE Price Index Chart
Source: YCharts

The Fed­er­al Reserve began using the PCE Price Index as the head­line indi­ca­tor of U.S. infla­tion lev­els in 2012. Unlike its pre­de­ces­sor, the Con­sumer Price Index, the PCE Price Index tracks a broad­er range of goods and ser­vices that fall under the cat­e­gories of durable goods and non-durable goods. It is, how­ev­er, unable to cap­ture minor fluc­tu­a­tions in the prices of every­day items like cere­al and clothing.

Despite CPI not being the Fed’s lead­ing indi­ca­tor of infla­tion for the last ten years, investors are still hap­py to mine month­ly CPI num­bers for nuggets of opti­mism, which is often reflect­ed in stock mar­ket behav­ior. Bit­coin ral­lied in tan­dem with S&P 500 and Dow Jones futures on Nov. 10, 2022, as the so-called core CPI for Oct. 2022 came 0.3% below mar­ket expec­ta­tions at 0.3%.

PCE Price Index rally could mark a short-term upside for Bitcoin

Bitcoin’s ral­ly in tan­dem with the stock mar­ket could be a sign that the cryp­tocur­ren­cy may be more sus­cep­ti­ble to macro­eco­nom­ic move­ments in the medi­um to short term, even as the indus­try grap­ples with the fall­out from the col­lapse of major cryp­to exchange FTX.

Its ral­ly to $17,000 plus in ear­ly trad­ing on Dec. 1, 2022, was its high­est lev­el since the Bahami­an exchange col­lapsed under the weight of mass with­drawals in ear­ly Nov. 2022.

“The risk relief ral­ly is com­ing at just the right time for Bit­coin,” said Craig Erlam of Oanda. 

Eight CEO and tech­ni­cal ana­lyst Michaël van de Poppe not­ed that the news was positive.

But some experts still believe that Bit­coin is unlike­ly to take off on a major ral­ly soon and will face resis­tance from the June 2022 price of $17,600.

Before the col­lapse of FTX, Bit­coin tracked the stock mar­kets close­ly, as investors in both stocks and cryp­to danced to the tune of the Fed­er­al Reserve’s tight­en­ing mon­e­tary pol­i­cy. The cen­tral bank has increased inter­est rates six times in 2022 in response to a boom­ing U.S. econ­o­my, fueled part­ly by excess pan­dem­ic-era stim­u­lus money.

For Be[In]Crypto’s lat­est Bit­coin (BTC) analy­sis, click here.

Disclaimer

All the infor­ma­tion con­tained on our web­site is pub­lished in good faith and for gen­er­al infor­ma­tion pur­pos­es only. Any action the read­er takes upon the infor­ma­tion found on our web­site is strict­ly at their own risk.



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