Bitcoin Drops Below $50,000 as Inflation Data Surprises Investors
Bitcoin experienced a setback on Tuesday, falling 3% to $48,535.17, following the release of higher-than-expected inflation data. The cryptocurrency had reached a milestone the day before by surpassing the $50,000 mark, its highest level in over two years. Currently hovering around $48,600, Bitcoin’s performance is closely monitored by investors and chart analysts.
Investors are eagerly watching to see if Bitcoin can maintain multiple closes above the $48,600 level, as this could potentially support new highs above $50,000 and even an all-time high. It’s worth noting that Bitcoin reached its peak of $68,982.20 on November 10, 2021.
The broader crypto market experienced a sell-off alongside Bitcoin, triggered by the hotter-than-expected CPI (consumer price index) reading. Coin Metrics reported that Bitcoin’s drop to $48,535.17 came as the U.S. Bureau of Labor Statistics revealed a larger increase in the January CPI than economists had anticipated. This news resulted in higher yields, with the benchmark 10-year U.S. Treasury yield rising by 10 basis points. Investors began to worry that the Federal Reserve might not be able to cut rates as frequently as previously expected, leading to pressure on risk assets.
Nico Cordeiro, Chief Investment Officer at Strix Leviathan, expressed his perspective on the situation. He believes that, for now, the cryptocurrency rally will continue. However, if inflation remains higher than expected, Cordeiro warns of potential long-term weakness in Bitcoin, going against the prevailing belief that it serves as an inflation hedge. According to Cordeiro, Bitcoin should be seen as a gauge of liquidity within the financial system, rather than as protection from inflation.
Ether and Solana’s SOL token outperformed other cryptocurrencies, with both hovering just above the flat line after earlier gains. Yuya Hasegawa, a crypto market analyst at Bitbank, the Japanese bitcoin exchange, highlighted Ethereum’s role in leading the crypto rally on Monday. He attributed the 5.5% rise in Ether’s price to anticipation of Ethereum’s upcoming major tech upgrade in March, known as Dencun. Hasegawa also pointed out renewed interest in NFTs (non-fungible tokens) from the crypto community as a contributing factor. He predicts a potential minor correction in Ether’s price within a week, but overall expects the upward trend to continue due to increased demand through ETFs and positive technical sentiment.
In conclusion, Bitcoin’s drop below $50,000 following the release of hotter-than-expected inflation data has raised concerns among investors and analysts. The cryptocurrency’s performance in the coming days and its ability to maintain support levels will be closely watched. Meanwhile, Ether and Solana’s SOL token continue to demonstrate resilience and positive momentum, driven by factors such as Ethereum’s upcoming upgrade and growing interest in NFTs.
Analyst comment
Positive news: Ether and Solana’s SOL token demonstrate resilience and positive momentum, driven by factors such as Ethereum’s upcoming upgrade and growing interest in NFTs.
Neutral news: Bitcoin dropped below $50,000 following the release of higher-than-expected inflation data, raising concerns among investors and analysts.
Market analysis: Bitcoin’s performance in the coming days and its ability to maintain support levels will be closely watched. Ether is expected to experience a potential minor correction, but overall, the upward trend is expected to continue due to increased demand through ETFs and positive technical sentiment.
