Bitcoin (BTC) edged slightly lower on Wednesday after gaining 4.28% over the previous two days, remaining just below its all-time high of $111,980. Despite the minor pullback, strong risk-on sentiment persists amid easing U.S.-China trade tensions and heightened anticipation for the U.S. Consumer Price Index (CPI) data release. According to K33 Research, current risk-averse positioning in the market could actually set the stage for further upside momentum.
Market Sentiment Boosted by Easing Trade Tensions
Bitcoin surged 4.2% early in the week as news emerged that the United States and China had resumed trade negotiations in London. The two economic powerhouses agreed to relax export restrictions—particularly on rare earth materials—and established a framework to maintain a tariff truce. This diplomatic progress has significantly improved investor confidence and fueled broader risk appetite across financial markets.
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Although Bitcoin pulled back slightly on Wednesday, it remained within 2.2% of its record high. This resilience highlights growing market maturity and increasing institutional interest in digital assets as macroeconomic headwinds begin to ease.
Notably, a U.S. federal appeals court recently allowed President Donald Trump’s so-called "Liberation Day" tariffs to remain temporarily in effect, reversing an earlier lower court decision that had blocked their implementation over procedural concerns. While trade policy remains dynamic, the current trajectory favors reduced uncertainty—a bullish signal for risk assets like Bitcoin.
Investors Await U.S. CPI Data for Fed Rate Clarity
Market focus now turns to the May U.S. CPI report, scheduled for release later on Wednesday. FXStreet analyst Haresh Menghani notes that investors are closely watching inflation data for clues about the Federal Reserve’s future interest rate path.
If annual CPI inflation comes in higher than expected, it could reinforce expectations that the Fed will hold rates steady in July. Such an outcome would likely strengthen the U.S. dollar (USD), triggering a temporary shift toward risk-off sentiment and potentially pressuring Bitcoin and other growth-sensitive assets.
Conversely, a softer-than-expected inflation print could reignite speculation of a dovish pivot by the Fed, weighing on the dollar and boosting investor appetite for alternative stores of value. Historically, declining real interest rates and dollar weakness have correlated strongly with rising Bitcoin prices.
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Given this context, the CPI release represents a key catalyst that could either accelerate Bitcoin’s move toward new highs or trigger a short-term consolidation phase.
Bullish Signals Emerge from On-Chain and Derivatives Data
A recent report from K33 Research underscores growing evidence of a healthy, sustainable rally in Bitcoin. Despite short-term price fluctuations, derivatives indicators suggest that excessive leverage has been avoided—a positive sign for long-term momentum.
One key metric is funding rates across major exchanges. The average daily funding rate for Binance’s BTCUSDT perpetual contract was negative on Friday and Sunday, indicating cautious trader behavior and a lack of aggressive long positioning. Over the past week, the 7-day average annualized funding rate stood at just 1.3%, a level historically observed near local market bottoms rather than at peaks.
“Perpetual contracts show risk aversion, pointing to a healthy upside with room for further gains,” K33 analysts noted.
This pattern suggests that current buying pressure is not driven by speculative frenzy but by underlying demand—making the current uptrend more durable.
Additionally, institutional inflows continue to strengthen. According to SoSoValue, U.S. spot Bitcoin ETFs recorded $431.12 million in net inflows on Tuesday—the second consecutive day of positive flows. Sustained institutional accumulation often precedes major price breakouts, as it reflects growing confidence in Bitcoin’s long-term value proposition.
Technical Outlook: BTC Nears Breakout Territory
From a technical perspective, Bitcoin found solid support at $101,000—the level of the 50-day exponential moving average (EMA)—before staging a strong rebound. On Monday, BTC closed above the critical resistance level of $106,406 and climbed toward $110,000 the following day. As of Wednesday, price dipped slightly to around $109,500 but remains poised for another attempt at the all-time high of $111,980 set on May 22.
The daily Relative Strength Index (RSI) currently reads 61—above the neutral 50 threshold—signaling sustained bullish momentum. Moreover, the Moving Average Convergence Divergence (MACD) generated a bullish crossover on Tuesday, reinforcing the buy-side bias.
Should Bitcoin maintain upward momentum, a retest of $111,980 is highly probable—and a decisive breakout could open the door to even higher targets.
On the downside, initial support lies at $106,406. A sustained break below this level could trigger further selling pressure, potentially extending the correction toward the 50-day EMA zone near $101,000.
Frequently Asked Questions (FAQs)
Q: What drives Bitcoin’s price movements?
A: Bitcoin’s price is influenced by supply and demand dynamics, macroeconomic factors (like inflation and interest rates), regulatory developments, institutional adoption, and investor sentiment. Events such as ETF approvals and geopolitical shifts also play significant roles.
Q: Is Bitcoin safe to invest in during volatile markets?
A: While Bitcoin is inherently volatile, many investors view it as a long-term hedge against inflation and currency devaluation. Diversification and risk management are essential when allocating capital to crypto assets.
Q: How do U.S. inflation reports affect Bitcoin?
A: Lower-than-expected inflation can lead to expectations of looser monetary policy, which tends to weaken the U.S. dollar and boost Bitcoin’s appeal as an alternative asset. Conversely, high inflation may delay rate cuts, supporting the dollar and creating short-term headwinds for BTC.
Q: What are funding rates, and why do they matter?
A: Funding rates reflect the cost of maintaining leveraged positions in perpetual futures markets. Negative or low rates suggest traders aren’t overly bullish, reducing the risk of a leveraged long squeeze and indicating healthier market conditions.
Q: Can Bitcoin reach $120,000 or higher?
A: While no price prediction is guaranteed, sustained institutional inflows, favorable macro conditions, and strong technical indicators make new all-time highs increasingly plausible. A break above $112,000 could trigger momentum-driven buying toward $120,000 or beyond.
Q: What is Bitcoin dominance, and why does it matter?
A: Bitcoin dominance measures BTC’s market cap relative to the total crypto market cap. High dominance often signals risk-off behavior or strong confidence in Bitcoin as a store of value, while declining dominance may indicate capital rotation into altcoins during bullish cycles.
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With macro risks receding, institutional demand rising, and technical indicators flashing green, Bitcoin appears well-positioned for another leg higher. While short-term volatility is inevitable, the confluence of favorable fundamentals and cautious market positioning suggests that a new all-time high may be within reach sooner than expected.
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