Bitcoin surged above $64,000 on Tuesday after weaker-than-expected US inflation data boosted investor sentiment, although traders remained cautious about whether the cryptocurrency could sustain gains above a key resistance level.
The world’s largest cryptocurrency gained more than 2% during Wall Street trading after the US Consumer Price Index (CPI) for June came in at 3.5%, below market expectations of 3.8%. The reading marked the largest monthly decline in inflation since April 2020, strengthening appetite for risk assets.
According to the US Bureau of Labor Statistics (BLS), the decline was largely driven by a 5.7% drop in energy prices, which offset increases in housing and food costs despite ongoing geopolitical tensions in the Middle East.
The softer inflation data lifted both cryptocurrency and equity markets, as investors anticipated a less aggressive monetary policy outlook from the US Federal Reserve. Market expectations for further interest rate increases also eased, although traders continue to expect a 25-basis-point rate hike at the Fed’s September policy meeting.
Economist Mohamed El-Erian said the inflation report should help moderate expectations of a more hawkish monetary policy stance.
Despite the rally, market participants warned that Bitcoin still faces strong resistance above the $64,000 level.
Market analyst Exitpump said the recent gains were partly driven by short sellers closing positions after the inflation data, rather than fresh buying momentum. The analyst noted that strong passive demand had prevented further declines, but described the market as remaining in a range-bound trading environment.
Data from CoinGlass showed that more than $220 million in short cryptocurrency positions were liquidated over the past 24 hours as prices climbed.
Another trader, Killa, said Bitcoin could still face selling pressure if it fails to hold above the weekly opening level. The analyst identified $64,800 as a key liquidity zone, warning that failure to reclaim and sustain higher prices could result in another decline toward the $60,000 level.
Investors are now watching whether Bitcoin can decisively break above resistance or remain confined within its recent trading range as markets continue to assess the outlook for US monetary policy.
