Bitcoin’s Second Major Consolidation ‘Nearly Complete’ Amidst Tame Inflationary Pressures

Market participants continue to load up their bags & move their Bitcoin into storage; coins are moving to HODLers with very little history of selling.

Bitcoin is picking up momentum and inching closer and closer to its all-time high of $58,350 as President Joe Biden signed a $1.9 trillion relief bill into law that drives a risk-on rally in financial markets.

“Bitcoin’s resilience is proving to be the stuff of legend,” said Antoni Trenchev, managing partner and co-founder of crypto lender Nexo in London. “Every correction is an opportunity to reset and restart the move upwards.”

As Bitcoin makes its way to an ATH, we have a “solid” amount of on-chain support below the level as strong hands came in to buy the latest dip that took us to about $43,000 at the end of last month.

People are not only scooping off the coins faster but also moving them off the exchanges for self custody and in hopes for higher prices in the future. The percentage of Bitcoin supply on cryptocurrency exchanges is currently at a 37-month low at just about 13%.

According to Kraken Intelligence, “market participants continue to come to market, load up their bags & move their Bitcoin into storage.”

The recent sell-off actually saw coins moving to HODLers that have very little history of selling, said on-chain analyst Willy Woo.

“The second major consolidation of the 2021 bull market is nearly complete,” he added.

The gains in the cryptocurrency market that has the overall market cap soaring past $1.7 trillion came amidst the pretty tame broader inflationary pressures. The key measure of US consumer prices rose less than expected in February, as per the monthly inflation report.

“As long as the economy isn't moving, inflation is likely to remain low, despite the copious amount of new cash in the system,” wrote Mati Greenspan in his daily newsletter Quantum Economics.

The Labor Department said its consumer price index increased 0.4% last month after rising 0.3% in January. In the 12 months through February, the largest rise of 1.7% was seen since February 2020.

Meanwhile, gasoline prices increased 6.4% last month, accounting for half of the rise in CPI, on top of a 7.4% gain in January. Food prices only climbed 0.2% but are up 3.6% from Feb. 2020.

For its 2% inflation target, the Fed tracks the core personal consumption expenditures (PCE) price index, which is at 1.5%.

The inflation is not ticking up because “all the new money has not yet proliferated throughout the economy. A lot of it is either sitting dormant in bank accounts or increasingly being put to work in financial markets,” said Greenspan. And that is why we are seeing asset inflation but not of goods and services yet.

For the bond king Jeffery Gundlach, CEO of DoubleLine Capital, we could be looking at 4% inflation as soon as June or June that would eventually likely “spook the bond market.”

As we saw in the past couple of weeks, the sell-off in the bond market resulted in the Treasury yields to surge that weighed on risky assets, gold, and Bitcoin heavily.

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