Bitcoin News Today: Bitcoin Drops $7,400 in Two Days Amid US Inflation Data

Bitcoin (BTC) experienced a significant correction, dropping by $7,400 over just two days. This sharp decline occurred as the cryptocurrency was extremely overbought and coincided with the release of the latest US Consumer Price Index (CPI) data, which came in slightly higher than anticipated. The S&P 500 Index fell by 0.4% in response to the inflation figures, while the tech-heavy Nasdaq ended the day higher. The market is now awaiting the Producer Price Index (PPI) figures, which could potentially cause further volatility.

Analysts suggest that the correction in Bitcoin's price was more likely due to overbuying and market euphoria rather than the slight increase in US monthly inflation. On various short-term indicators, the $BTC price was indeed overbought, and a market-calming correction was necessary to reset the market. While the sharpness of the correction may have surprised many investors, it helped to stabilize the market.

The 4-hour chart illustrates how the $BTC price breakout and surge to the all-time high was quickly negated by an even larger price move to the downside. However, with the dip potentially over, bulls now have the opportunity to start bringing the price back to the top. The Fibonacci extensions indicate that the price is consolidating above the first 0.236 level, suggesting that further price growth could take place from here.

The daily chart shows a long candle wick to the upside left behind after the two-day dip, followed by a rapid recovery that left a long wick in the opposite direction. The bulls will be hoping that the last wick cancels out the first one. The Relative Strength Index (RSI) has moved back down but is angled slightly up as of Wednesday morning. The dashed blue line shows that the indicator is still in a downtrend, which will need to be broken to the upside for the price to continue moving higher.

The weekly chart provides a more critical view of the candle wick to the upside. Historically, similar-sized wicks have appeared at the tops of downtrends. However, with only three days into this week and potentially more upside to come, this wick is likely to reduce in size. The RSI on the weekly chart is in a similar condition to the daily, with a downtrend in force for quite some time. This downtrend will need to be broken for the price to continue going higher.

Despite the significant drop, this correction is likely just a temporary blip in Bitcoin's overall bull market trajectory. Corrections are healthy as they release built-up pressure and prevent a perilous cascade of selling. With the correction behind it, Bitcoin is now poised to continue its upward trend, barring any unexpected developments in the US PPI data.