The US Bureau of Labor Statistics has published the Consumer Price Index, for the month of June 2022. It was 9.1% which is the biggest inflation increase the US has seen in over 40 years. The Federal Reserve’s monetary policy is determined by the CPI, which is a reliable indicator of inflation.
Bitcoin tumbles due to negative CPI report
The price of Bitcoin (BTC), prior to July 12th’s release of U.S. Inflation Statistics, settled in a steady holding pattern. However, this added further negative volatility.
The latest CPI report from June shows that inflation in the United States was 9.1%. This is the highest rate since November 1981. This only served to increase the decline in Bitcoin and other cryptocurrency markets.
BTC drops by around 4 percent within 10 minutes of CPI being released. Traditional market gauges like the S&P 500, Dow Jones, and NASDAQ are all sharply lower.
TradingView data indicates that Bitcoin currently trades at $19180. This is a 3.45% drop on the day. It has risen 4.70% in the week. With a market cap totaling $366 billion, it’s trading at $19180. The market cap of the digital asset, which is the most popular, fell from $379.91 to $364.55 trillion, by $15 billion.
Bitcoin market cap at $374 Billion. Source: TradingView
Inflation increased by 8.6% in the past month, which is the highest rate since 1981. In response to high inflation, the Fed instituted quantitative tightening of monetary policies.
The entire crypto industry saw a severe downturn as a result of the Fed’s hardline monetary policy. The last ten years’ worst financial quarter for Bitcoin was experienced.
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This revelation may have severe effects for the cryptocurrency markets, if last month’s CPI is any indicator.
The time came for the publication of the inflation statistics and investors collectively took a deep breathe. The global markets remained calm, but as many prominent crypto trading analysts had hinted at the start of the week, an announcement—positive or negative—would be said to have a significant impact on the price of digital assets.
Inflation statistics that were much higher than anticipated will put pressure on the United States Federal Reserve to increase interest rates.
More pressure
Bitcoin is unable to hedge against inflation and has seen a significant drop in its value, falling by 72% this year. Along with other risk assets, Bitcoin has been severely impacted by the Fed’s monetary policies because it has always existed in a low-interest rate environment.
According to reports last week, the Federal Reserve could pull off a soft landing. This would prevent a recession and significantly raise interest rates. Even though interest rates were steadily increasing, it was still the case.
The founder of Eight Global, Michal van de Poppe, statedThe CPI will decide whether Bitcoin succeeds. BTC faces significant challenges with the $19.5K support and $19.8K resistance levels. BTC could experience a substantial decline depending on CPI.
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Featured Image from Shutterstock. Charts from TradingView.com