Bitcoin price plummets as global inflation numbers surge
Australia, Canada and many European nations have seen their inflation numbers soar recently.
- The crypto market has largely followed tech-focused stock indices such as the Nasdaq, S&P500 and Dow Jones in recent months.
- The total market capitalisation of the crypto market has slipped by 5% to AUD$1.55 trillion over the last 24 hours.
- Experts believe that if BTC is not able to maintain its AUD$35,500 resistance, it could drop as low as AUD$15,000 in the near term.
After having stabilised around AUD$42,500 (US$30,000) for over a month, Bitcoin has been faced with immense bearish pressure, with the digital currency slipping from AUD$40,000 to $35,683. BTC's 24-hour losses currently stand at -8.5% with the asset trading at AUD$36,151.
This latest drop comes amid rising inflation concerns. The US Consumer Price Index — a prominent metric used to gauge inflation data — surged to a 40-year high of 8.6% recently. The crypto market has continued to closely follow tech-focused indices such as the Nasdaq Composite, S&P500 and Dow Jones, with each market losing 3.5%, 2.5% and 2.7% respectively.
Other popular consumer sentiment gauges have also plunged to their lowest levels in over a decade, with the situation likely to worsen in the near term. This is because the Federal Reserve is all set to increase interest rates by 50 basis points. Inflation numbers have also soared across Australia, Canada and several countries within Europe. The European Central Bank (ECB) announced earlier this week that it will soon wrap up its asset purchase program and commence its rate hike in the coming few months.
A spokesperson for American financial giant First Republic Bank noted that with most major central banks likely to pursue quantitative tightenings (QT) and policy rate hikes into 2023, markets across the board will remain fragile, adding:
"Today's negative reaction to the higher than expected inflation print demonstrated this. We expect this fragility to continue whipsawing markets."
Joe DiPasquale, CEO of crypto fund manager BitBull, believes that even though cryptocurrencies have showcased a large correlation with the equity markets over the past year, their relationary future remains largely uncertain. He added:
"We will be looking for potential new lows and reactions to them as we assess market sentiment. The inflation figures definitely don't bode well for markets."
Any silver lining in sight?
Independent analyst Michaël van de Poppe said that for BTC to regain any sort of bullish momentum, it needs to gain approximately AUD$5,700 (US$4,000) from its current spot price of around AUD$36,000 (US$25,300). He added that if Bitcoin is not able to hold on to either AUD$41,750 or AUD$40,600, it will most likely drop to the AUD$3,400–$3,700 range.
Bloomberg Intelligence strategist Mike McGlone believes that as long as the crypto-stock market correlation persists, Bitcoin could continue to experience a high level of bearishness. He noted:
"If the stock market keeps going down, virtually everything will have peaked. Just some normal reversion can feel like a crash and the 2020–2021 risk asset pump may go down in history like 1929 and 1999."
Lastly, some analysts suggest that if Bitcoin touches AUD$28,500 in the near term, it could drop to AUD$14,500 or even lower.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.
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