Inflation Hits New High, Will Bitcoin And Ethereum Plummet Again?

Bitcoin and Ethereum reacted negatively to the print of the Consumer Price Index (CPI) in the US. The measure is used to measure inflation in the US dollar and it reached 9.1% for the month of June which is an increase over the results of May.

Related reading | Bitcoin’s Social Dominance Rate Reaches All-Time High in 2022

At that time, the crypto market collapsed in the following days after the CPI was printed. This meant that inflation was still rising and hinted at more intervention by the US Federal Reserve. High inflation translates into significant damage to bitcoin and other risky assets.

At the time of writing, BTC price is trading at $19,400 with a loss of 3% in the last 24 hours. ETH price is trading at $1,000 with a loss of 3% in the last 24 hours which indicates the possibility of further losses for two larger cryptocurrencies by market cap.

BTC price trends are down on the 4-hour chart. source: BTCUSD TradingView

Economist Alex Krüger noted a 40% decline in the price of these digital assets and a 7% decline in the S&P 500 Index. The bearish price action supports the expectation that the Federal Reserve will become more aggressive with upward inflation trends. Economist He said:

The latest CPI figure caused a massive crash, with the S&P down 7% in two days. Meanwhile, the ensuing crash in the cryptocurrency was so severe that the CPI could be renamed the Crypto Pain Index.

However, Krueger believes that this time around, Bitcoin and Ethereum will be more resistant to CPI. The last time this metric was published, it exceeded market expectations, this time inflation stayed within expectations.

Source: Alex Krüger via Twitter

Thus, the effect generated by this metric may have been priced in. According to the economist, the market has “already sold out significantly since Sunday in anticipation” of the June CPI.

Inflation may have peaked, but Krueger believes that there is outdated data from different sectors used to measure inflation. This indicates lower energy prices which should contribute to lower CPI for July. This may provide some breathing space for Bitcoin and Ethereum.

Why Bitcoin could feel better in the coming months

In addition, the economist claims that there are no major future events that could negatively affect the price of Bitcoin. The Fed was set at a 75 basis point rate hike which was also priced in by the market, after the capitulation event.

In the short term, the June CPI reading may contribute to the bearish price movement in the traditional market. As it has been happening over the past months, this selling pressure will extend into the cryptocurrency market, but without turning into a “trend setting” event.

Related reading | Ethereum (ETH) continues to lose its luster, drops below $1,100

The key to a potential recovery will be on traditional stocks. The crypto market will find a convincing bottom once stocks start to bullish, and many believe that these assets will experience more pain over the coming months.

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