Bitcoin price spikes 5.1% as U.S. inflation decelerates from its peak
(Kitco News) - Crypto prices rallied across the board on Wednesday morning after the U.S. Consumer Price Index (CPI) print came in at a year-over-year increase of 8.5%. While inflation remains at some of the highest levels in decades, the actual print was lower than the expected 8.7%, which excited traders to dive back into the markets.
Bitcoin responded to the CPI print by spiking by 5.1% from support at $23,000 to an intraday high of $24,180, where it ran into a firm wall of bearish resistance that remains the last major barrier before $28,000.
BTC/USD 4-hour chart. Source: TradingView
Traders breathed a sigh of relief following the print, which came in 0.2% below expectations, as it could potentially lead to a less aggressive interest rate hiking schedule by the Federal Reserve.
The past two Federal Open Market Committee (FOMC) meetings saw the central bank raise interest rates by 75 basis points on each occasion, and today’s month-over-month decline in CPI provided the first evidence that the actions taken by the central bank are starting to have an effect.
Short term rally initiated
The positive reaction to the lower than anticipated CPI print was immediate, with prices across the crypto market as well as the traditional markets surging higher following the news.
And the gains are likely to continue for at least the next week, according to investment strategist and Real Vision CEO Raoul Paul, who suggested that the “Markets now have a pretty clear run until regional Fed surveys in a weeks or so.”
Macro/Crypto:— Raoul Pal (@RaoulGMI) August 10, 2022
Markets now have a pretty clear run until regional Fed surveys in a weeks or so. I expect those to be significantly weaker. Peak inflation gives way to peak growth fear. I do think markets will react positively to weak growth, not negatively, broadly speaking.
But not all analysts are ready to call an end to the bear market, including Blockware lead insights analyst William Clemente, who referred to the ongoing relief rally as “short term.”
What happens next for Bitcoin, the crypto market, and global financial markets, in general, is largely dependent on what the Fed does next. Or, as independent market analyst Michaël van de Poppe noted in the following tweet, the key metric to keep an eye on now is U.S. yields.
For the first time in 1.5 years the CPI data comes out lower.— Michaël van de Poppe (@CryptoMichNL) August 10, 2022
This doesn't show that inflation is over, just that expectations are worse and reality is better, which potentially could lead to the FOMC becoming more dovish -> less rate hikes.
Key to watch: U.S. Yields.
Double-digit gains for multiple altcoins
The wider altcoin market saw an even more pronounced reaction following today’s CPI print, with multiple coins in the top 200 seeing double-digit increases while the top altcoin Ether (ETH) gained nearly 9%.
Daily cryptocurrency market performance. Source: Coin360
The biggest gainers on the day include Injective (INJ), Flux (FLUX) and Lido DAO (LDO), which recorded increases of 24.79%, 23.76% and 18.15%, respectively.
The overall cryptocurrency market cap now stands at $1.14 trillion, and Bitcoin’s dominance rate is 40.3%.