Bitcoin Price Rebound Stumbles as Inflation Figures Fuel Concerns Over Future Trends
Bitcoin’s price is struggling to maintain momentum after recently reported inflation figures exceeded expectations. Following the Consumer Price Index report, which showed rising inflation rates, Bitcoin’s value dipped sharply, prompting analysts to predict further declines towards $90,000. The Federal Reserve’s response to inflation may significantly influence cryptocurrency demand.
Bitcoin’s price recovery towards $100,000 has faced challenges, primarily due to insufficient buying interest around the $98,000 mark, compelling sellers to stabilize prices near $95,000. The recently released Consumer Price Index (CPI) report adds to this uncertainty, as analysts suggest that the higher-than-expected inflation could result in Bitcoin’s descent towards $90,000 in the upcoming week.
Initially, Bitcoin’s price approached $96,000 before the CPI report, fueled by market anticipations of a milder inflation rate for January. However, the CPI revealed a 3% increase compared to the previous year, outpacing December’s figures of 2.9% and exceeding economists’ forecasts.
The January CPI often reflects substantial pricing adjustments that businesses apply at the year’s start, making this report vital to gauge the Federal Reserve’s effectiveness in managing inflation. The 0.5% month-over-month rise surpassed predictions, further contributing to market volatility.
In the wake of the CPI announcement, Bitcoin experienced a swift decline in value, dropping from $96,000 to approximately $94,000 within minutes. Coinglass indicated nearly $25 million in Bitcoin liquidations, as buyers swiftly exited $22 million in long positions.
When inflation exceeds expectations, it often incites the Federal Reserve to maintain or even increase interest rates to curtail inflation. Elevated interest rates tend to strengthen the dollar and enhance the allure of Treasury bonds due to higher yields, thereby diverting investments away from riskier assets such as cryptocurrencies, adversely affecting demand and prices.
Market analysts believe that the recent rise in inflation could hinder the recovery trajectory of Bitcoin and the broader crypto market, initiated after the crash on February 3rd. It is anticipated that Bitcoin will test the $90,000 level this weekend, reducing the probability of its ascent to $100,000 soon.
In summary, Bitcoin’s recent price recovery has stalled, largely influenced by a disappointing CPI report that indicates rising inflation. Analysts predict that Bitcoin may approach $90,000 in the near term due to the potential for sustained high interest rates, which could diminish its appeal amidst market uncertainties. Future movements of Bitcoin will largely depend on macroeconomic indicators and investor sentiment in the coming days.
Original Source: coinpedia.org
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