Bitcoin (BTC/USD) price bounced back on Wednesday after the El Salvador parliament voted to make the cryptocurrency a legal tender. The coin rose to $34,300, which was about 11% above its lowest level on Tuesday. Other altcoins like Ether, Ripple, and Cardano also retreated.
El Salvador adopts Bitcoin
The biggest catalyst for Bitcoin’s price action on Wednesday was the decision by the El Salvador parliament to pass a bill making the currency a legal tender. The bill will now move to the Senate and then to the country’s president desk, who is expected to sign it into law.
Still, the impact of that move will be relatively minimal. For one, El Salvador is a relatively small country of more than 6 million. It also has a gross domestic product (GDP) of more than $27 billion, which is relatively small from a global standpoint.
The new law means that businesses will now be permitted to show their prices in Bitcoin. Similarly, residents can pay their taxes using the currency. However, the US dollar will continue to be the dominant currency in the country. Also, it is still early to see whether other countries will follow El Salvador and adopt the coin.
Inflation data ahead
Bitcoin price is also rising ahead of the US inflation data that will come out on Thursday. The numbers are expected to show that consumer and producer prices continued rising in May.
The previous data showed that the headline CPI rose by 4.2% in April while core CPI rose by 2.3%. Economists polled by Bloomberg now expect the numbers to reveal that the CPI and core CPI rose to 4.7% and 3.2%, respectively.
Stronger than expected numbers will raise the possibility that the Fed will start changing its tone on interest rates and quantitative easing since the labour market is still tightening.
Higher interest rates and a dovish are often viewed as being bearish for Bitcoin and other riskier assets. The logic is that if Bitcoin prices rose when the Fed was easing, the opposite will happen when tightening starts.
Bitcoin price prediction
The daily chart shows that the BTC price has been in a tight range recently. The coin has struggled to move below $30,000 and above $39,000. It also seems to be forming a bearish consolidation pattern. Most importantly, the coin’s bearish trend is being supported by the 50-day and 25-day moving averages.
Therefore, there is a possibility that the coin will breakout lower before or after the US inflation data. If this happens, the coin will likely move below the support at $30,000.
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