Bitcoin’s price showcases signs of a local bottom, but emerging inflation data suggests more dips

Posted: 10 January 2022 2:14 am
BTC 01-11 1800x1000

US inflation levels recently touched the 6.8% mark, the highest since 1982.

  • Experts believe there is a chance Bitcoin may dip as low as $30K before restarting on its path of monetary ascent.
  • Blockforce Capital CEO Eric Ervin believes that November 2021’s price correction has helped wipe out a majority of “BTC shorters” from the market.
  • The crypto Fear & Greed Index is currently showcasing a reading of just 18 — signaling extreme fear among investors globally.

In the last couple of weeks, Bitcoin (BTC) has exhibited tremendous price uncertainty. Over the past seven days, the flagship cryptocurrency’s value has dropped by nearly 12%, with experts claiming that more dips may be incoming. At press time, BTC is trading at $41,922.

As to where Bitcoin may be headed, several prominent analysts, including Aike Capital founder Alex Kruger, noted that the cryptocurrency may fall as low as $30,000 if expected US inflation figures turn out to be higher than forecasted. Kruger added:

“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 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 year’s end, rising at a month-over-month rate of 0.4%.

This is also one of the core reasons the Federal Reserve is keen on starting with its tapering plans earlier than expected. Any major delays could really send inflation rates soaring to unprecedented levels. Inflation levels for November were found to have touched a four-decade high of 6.8%.

How to buy Bitcoin

Can Bitcoin hold ground?

According to senior Bloomberg commodity strategist Mike McGlone, Bitcoin needs to maintain its all-important support level of $40,000 to exit its ongoing bearish phase. He noted that as the world moves 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 November 8 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 face a mini bear stint until 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 $39,000. However, the sentiment surrounding the market could not have been any different. For example, on January 15, 2021, the crypto Fear & Greed Index lay at a base reading of 93, pointing to a market in a state of extreme greed. However, at present, this metric stands at under 18, signaling that investors are in a state of extreme fear.

Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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