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Crypto prices have collapsed in 2022.
Dusan Zidar / Dreamstime
Bitcoin
and other cryptocurrencies fell on Wednesday after investor sentiment deteriorated following the release of key US inflation data.
The price of Bitcoin is 4% over the last 24 hours to $ 19,200, after being higher and approaching the $ 20,000 level as it plunged on Tuesday. The largest crypto made significant gains with a rally into last weekend, changing hands as high as $ 22,000, but has since fallen back.
US consumer price index data revealed year-on-year inflation of red-hot 9.1% – well ahead of 8.8% expected by the market and the highest level in four decades. The KPI data is the key due to how central the risk of recession has been for the sale of shares in 2022, which has plummeted both
S&P 500
and technology-heavy
Nasdaq
into a bear market and increased pressure on crypto.
In the face of the highest inflation in decades, the Federal Reserve has already moved aggressively to tighten monetary policy, and is expected to continue to do so as long as prices remain warm. The fear in the markets is that this may reduce demand to the point that it causes a recession, which will be trouble for risky games like Bitcoin.
The higher-than-expected CPI figure has probably frightened investors by raising the outlook for a more serious Fed. In any case, the release sent the shares down on Wednesday, paving the way for digital assets to follow. While cryptocurrencies should in theory act as uncorrelated assets, Bitcoin and its peers have been shown to move in line with stocks, and especially technology stocks.
“Markets are constantly expecting a peak in inflation, and are increasingly disappointed,” said David Donabedia, chief investment officer at CIBC Private Wealth. “This probably means 75 basis points in both July and September [Fed] “There is nothing positive about the markets in this report.”
But at least one analyst believes that the downside for Bitcoin could be dampened because investors had expected a higher CPI figure.
“The market has priced high inflation figures this week, so a downside for Bitcoin may be limited than previously expected. However, we can not be too optimistic,” said Yuya Hasegawa, an analyst at cryptocurrency exchange Bitbank, ahead of the CPI release.
From a technical perspective, however, it is possible that continued bad news could lead to a more painful sale of crypto.
Katie Stockton, managing partner of the technical research group Fairlead Strategies, said on Tuesday that Bitcoin’s downside momentum intensified, with an increasing likelihood that prices would test support as low as $ 18,300. reached the bottom of a sale in June.
Beyond Bitcoin, much of the cryptocurrency was designed in the same way.
Ether,
the second largest digital asset, fell 4% and held over $ 1,000. Among smaller cryptocurrencies, or altcoins,
Solana
and
Cardano
each fell 5%. Memecoins – originally intended as internet jokes – moved in step with
Dogecoin
and
Shiba Inu
4% and 5% in minus, respectively.
Along with macro factors, cracks in the crypto industry itself have exacerbated recent price declines, including the meltdown of stablecoin Terra and the failure of the hedge fund Three Arrows Capital. Bitcoin continues to trade at less than a third of the record level, reached in November 2021, and just reached the worst quarter in more than 10 years.
Write to Jack Denton at [email protected]
