Bitcoin ended last week on a positive note, snapping its record losing streak of nine weeks. However, the bulls failed to capitalize on that development and the price has dived again beneath the $30,000 psychological mark, extending its sideways pattern. Many investors suggest that major cryptocurrencies experienced a relief rally and might eventually resume their downtrend, while others point out that the market could be approaching its bottom. Therefore, the latest US CPI report awaited on Friday, could shed some light on this puzzle and provide crypto traders with fresh directional impetus.

Since the beginning of 2022, major cryptocurrencies have been moving in tandem with equity markets, exhibiting a higher positive correlation with tech stocks. In general, risky assets have been negatively impacted by the ongoing monetary tightening as most central banks have entered an interest rate hike cycle in their effort to scale down inflationary pressures. Thus, the big question that lies ahead is how strong policymakers can slam the brakes on economies without causing a recession.

On Friday, the May US CPI print will hit the markets, with investors anticipating signs that the inflation rate has indeed peaked in the United States. Should that scenario play out, the Fed might be able to proceed with a slower rate hike pace, which could essentially reduce the likelihood of a recession and boost investors’ risk appetite. On the other hand, a stronger-than-expected reading would force the Fed to act more aggressively, inducing further downside pressures on risky assets. Therefore, crypto traders would be closely scrutinizing the upcoming inflation data to determine the direction of Bitcoin’s next breakout move from its long-lasting rangebound pattern.

Bitcoin prices significantly depend on the supply-demand balance as the process of mining is the sole way to generate new coins. Last week, the New York State Senate approved a controversial proof-of-work (PoW) mining ban bill that will prohibit any new Bitcoin mining operations in the state, significantly deteriorating Bitcoin’s supply outlook. Specifically, the proposed bill would not only forbid the opening of new mining facilities but also reject the renewal of existing mines’ licenses unless they could operate with 100% renewable energy sources.

In addition, a worrisome sign for the crypto space is that Bitcoin miners have been recently offloading their long-term holdings to cover rising costs in the anticipation of lower prices. Bitcoin mining was an attractive sport when miners could get away with high energy prices as Bitcoin was trading at $50,000 or $60,000. However, soaring energy costs alongside cryptos trading at more than 50% off their peaks may now force most miners to go out of business. Overall, the short-term downside pressures induced by the recent accelerating sell-off in the miners’ effort to withstand the elevating energy prices could be eventually offset by weakening supply.

Bitcoin has been trading sideways since the beginning of May, unable to adopt a clear direction. Although the king of cryptocurrencies managed to jump above the $32,000 mark during the past week, its upside move failed to strengthen further and the price quickly returned into the tight $31,000-$29,000 range.

In the positive scenario, bullish actions could send the price to test the recent peak of $32,400 before the attention shifts to the $40,000 psychological mark.

On the flipside, should selling interest intensify, Bitcoin’s price may descend towards $28,000, which is the lower boundary of its recent sideways pattern. A violation of the latter could pave the way for the 2022 low of $25,390.