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 capitalization of the crypto market has slipped by 5% to AUD$1.55 trillion over the last 24 hours.
- Experts believe that if Bitcoin 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 stabilized around $30,000 for over a month, Bitcoin (BTC) has faced immense bearish pressure. The digital currency slipped from $31,000 to $22,000. BTC’s 48-hour losses currently stand at -8.5%, with the asset trading at $22,188.
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 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 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 $4,000 from its current spot price of around $25,300. He added that if Bitcoin cannot hold either $28,600 or $27,800, it will most likely drop to the $2,300–$2,600 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 $19,500 in the near term, it could drop to $10,000 or even lower.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.
Trying to get a handle on the markets? Explore strategies for how to trade crypto or see if there's a better platform for you with our guide to the best crypto exchanges.
Disclaimer: 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.
