Bitcoin's $90K Test Looms as Inflation Data Looms

Bitcoin (BTC) enters the final week of February in a state of uncertainty, with traders and analysts debating whether the cryptocurrency can avoid a fresh dip below $90,000. Several key factors are at play, including US inflation data, gold's continued rally, and Bitcoin's own volatility and network activity.

Bitcoin's price has been stuck in a tight trading range, with liquidity piling up on either side of the spot price. Traders are mapping out potential support levels, with some eyeing a retest of the $90,000 mark. Popular trader CrypNuevo noted that liquidation levels are equal on both the upside and downside, suggesting a potential push by either bulls or bears. Fellow trader Roman, however, was less optimistic, predicting a return to the bottom of the multimonth trading range.

On weekly timeframes, trader Luca identified an incoming test of Bitcoin's bull market support band, formed by two moving averages. He suggested that Bitcoin was primed for a return to the upside amid low funding rates, poor sentiment, and retail investors reducing exposure. However, the overall market sentiment remains bearish, and network activity has been declining, raising concerns about potential trouble brewing.

This week, markets are awaiting the release of the Personal Consumption Expenditures (PCE) Index, the Federal Reserve's "preferred" inflation gauge. The data could offer further insight into the risk of stagflation, which has been a growing concern for investors. While the potential for stagflation is a major concern, historical data shows that it is not necessarily associated with poor stock market performance.

In contrast to Bitcoin and other cryptocurrencies, gold continues to set new all-time highs and is working on its highest-ever daily close. The US dollar index (DXY) is seeking a reversal from a downtrend in place since early December. While a strong dollar typically pressures risk assets, the current landscape stands out on longer timeframes, with gold prices rising alongside the US Dollar and 10-year note yield.

Bitcoin's stubborn trading range has led to some rare readings from volatility metrics. On weekly timeframes, realized volatility is near record lows, approaching levels seen only a few times in the past four years. Similar compressions in the past have led to major market moves. Additionally, 1-week options realized volatility is