Bitcoin plunges below $19,000 amid highest US inflation print in 40 years
Categories: Bitcoin US
Bitcoin plunges below $19,000 amid highest US inflation print in 40 years
Bitcoin briefly fell below US$19,000 on July 13 after announcing higher than expected consumer price index figures in the US. Economists were tipping the June-on-year inflation number to 8.8 percent, but the declared rate dropped to 9.1 percent - the highest figure in more than 40 years - leading to an immediate and sudden drop in the price of BTC.
According to data from CoinMarketCap, the price of BTC fell more than 4.5 percent from US$19,989 to US$18,999 an hour after the CPI was announced. The price has since bounced back and BTC was changing hands at US$20,234 at the time of writing. Before the current crypto bear market and skyrocketing inflation in the broader economy, BTC was widely considered an inflation hedge.
In January, despite rising inflation, BTC found support around $43,000, but its price has plummeted as inflation continued to rise and the crypto market was heavily volatile. Record high inflation numbers will likely cause central banks around the world, including the US, to continue raising rates in an effort to restore price stability at the expense of short-term economic growth.
Generally speaking, higher interest rates mean less money is circulating in the economy, resulting in less pressure on consumer spending and inflation, which can translate into less money in crypto investors' pockets and further collapse for crypto prices.
The picture is further complicated by unique factors caused by the current wave of inflation – the war in Ukraine and ongoing complications from the COVID pandemic – which are not easily addressed with interest rate hikes, resulting in significant economic uncertainty over the medium term.