Bitcoin (BTC) hovered at just under $30,000 during European trading hours, showing signs of weakness ahead of the release of the U.S. consumer price index (CPI) report Friday.
The asset has traded in a relatively tight range of $28,000 to $31,000 over the past month amid a poor macroeconomic market sentiment and systemic risks in the crypto sector.
Price charts suggest bitcoin could drop to a support level of $29,400 over the weekend if current levels fail to hold. The asset has bounced several times from those levels over the past week, suggesting interest from buyers at those prices.
Friday saw weakness in several major cryptos, with Cardano’s ADA tokens falling 7% in the past 24 hours to lead losses among major tokens. Solana’s SOL fell 6%, ether (ETH) lost 2.3% and XRP fell 0.8%.
Overall, crypto market capitalization dropped by 2.3% to $1.28 trillion, continuing a slide from a capitalization of over $2.2 trillion in March.
The fall in crypto prices came ahead of the release of the CPI report scheduled for 8:30 a.m. ET Friday. Economists expect inflation in May to rise over 0.7% from April, meaning an 8.3% rise since May of last year, according to CNBC.
Inflation concerns have contributed to bitcoin’s fall in the past several weeks. In May, the U.S. Federal Reserve raised interest rates by the largest amount since 2000 as it seeks to tighten monetary policy following $2 trillion in stimulus in the past few years. The Fed's tightening has caused a drop in global stocks, which carried over to losses in bitcoin and other cryptocurrencies.
Earlier in April, Goldman Sachs (GS) analysts said in a note that the Fed's aggressive measures to control inflation could result in a recession, which added to investor concerns.
While bitcoin has closely followed the price movements of risky technology stocks in the past few months, some market observers remain upbeat about the long-term growth of cryptocurrencies.
“Generally, the correlation gap between cryptocurrencies and stock markets is long-term good news as it attracts the attention of professional investors,” Alex Kuptsikevich, a senior market analyst at FxPro, wrote in an email.
“Weakness in equity and bond markets, sagging gold and the murky outlook for the real estate market are turning to cryptocurrencies as another tool in a diversified portfolio,” he added.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.