Bitcoin vs New Inflation Data | Jerome Powell Crashing Bitcoin Soon?
The crypto markets saw some volatility this week in reaction to hotter than expected US inflation data. The consumer price index (CPI) for January came in at 3.1%, higher than the expected 2.9%. This marks the 34th consecutive month that inflation has exceeded 3%.
The crypto markets initially sold off on the news, with Bitcoin falling below $50,000 after recently surpassing that key level. Ethereum also pulled back from recent highs above $2,600. However, the declines appear relatively modest so far, with Bitcoin holding above $48,000.
The hot inflation data lowers the chance of the Fed pivoting to rate cuts this year. Some analysts believe rate cuts are needed to support risky assets like cryptocurrencies. Without that potential tailwind, the markets may struggle to sustain the rally seen in January.
However, other analysts point out the Fed was already anticipating a bumpy road on inflation and has been hiking rates aggressively to combat it. So this data may not change the Fed's course dramatically.
Much will depend on whether inflation continues to remain stubbornly high in February and March. If it shows signs of declining, the Fed may be able to stick to its plan of slowing rate hikes, which would be supportive for crypto.
In the meantime, the technical charts still suggest caution is warranted. Bitcoin appears to be struggling with $50,000 resistance. Key support lies around $46,000, near the 200-day moving average. A break below that could signal a deeper correction ahead.
Overall, the hot inflation data highlights the challenging macro environment facing cryptos. However, Bitcoin has held up relatively well considering the headwinds. Its ability to maintain key support levels will be an important indicator of overall market strength in the weeks ahead.
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