Bitcoin’s price showcases signs of a local bottom but emerging inflation data suggests more dips
US inflation levels recently touched the 6.8% mark, its highest since 1982.
- Experts believe there is a chance Bitcoin may dip as low as $30k before re-starting on its path of monetary ascent.
- Blockforce Capital CEO Eric Ervin believes that Nov 2021's price correction has helped wipe out a majority of "BTC shorters" from the market.
- The crypto fear and greed index is currently showcasing a reading of just 18 – signalling extreme fear among investors globally.
The last couple of weeks have seen Bitcoin, the world's largest cryptocurrency, continue to exhibit a tremendous amount of price uncertainty. In fact, over the past 7 days, the flagship cryptocurrency's value has dropped by nearly 12%, with experts claiming that more dips may be incoming in the near term. At press time, BTC is trading at a price point of AUD$58,379.
As to where Bitcoin may be headed, a number of prominent analysts including Aike Capital founder Alex Kruger noted that the cryptocurrency may fall as low as AUD$41,500 (approximately) if expected US inflation figures turn out to be higher than forecasted, adding:
"Bitcoin is now a macro asset that trades as a proxy for liquidity conditions. As liquidity diminishes, macro players now in the fray sell Bitcoin, and all of the other cryptos follow."
It is expected that the consumer price index (CPI), which serves as a key metric to assess the price increase of consumer goods and services regularly acquired by households, will rise to 7.1% by the end of the year, rising at a month-over-month rate of 0.4%.
This is also one of the core reasons why the Federal Reserve is keen on starting with its tapering plans earlier than expected since any major delays could really send inflation rates soaring to unprecedented levels. Inflation levels for November were found to have touched a 4-decade high of 6.8%.
Can Bitcoin hold ground?
According to senior Bloomberg commodity strategist, Mike McGlone, Bitcoin needs to maintain its all-important support level of US$40,000 (AUD$55,000) in order to be able to exit its ongoing bearish phase. He noted that as the world continues to move towards a more digital setting and as more and more people continue to adopt BTC as collateral, the ongoing volatility should gradually start to subside.
Eric Ervin, CEO of Blockforce Capital, believes that the 8 November drop, which saw BTC lose more than 15% of its value overnight, resulted in short-term profit takers being wiped off the market. In his view, there is a possibility that the market may be faced with a mini bear stint till the correction plays itself out.
Market sentiment needs to recover
Around the same time last year, Bitcoin was trading at a price point of around AUD$55,000; however, the sentiment surrounding the market could not have been any different. For example, on 15 January 2021, the crypto fear and greed index lay at a base reading of 93, basically pointing to the fact that the market was in a state of extreme greed. However, at present, this metric stands at under 18, signalling that investors are in a state of extreme fear.
Disclosure: The author owns a range of cryptocurrencies at the time of writing