What impact does US inflation data have on Bitcoin price?

US Inflation Data: A Decisive Factor in Bitcoin’s Price Trajectory

The release of key U.S. inflation data has sent shivers through the cryptocurrency market, leading to a significant decline in the price of Bitcoin. The data, released on Wednesday, April 10th, showed a rise in headline inflation to 3.4% year-on-year, exceeding expectations of 3.2%.

Market Reaction:

In response to the news, Bitcoin plunged over 2.4% to fall below the $69,000 mark. The decline was part of a broader sell-off in the cryptocurrency market, with other altcoins such as Ethereum, Solana, and Cardano also experiencing significant losses.

Impact on Bitcoin’s Price:

The release of inflation data can have a significant impact on Bitcoin’s price due to its correlation with interest rates. In economic theory, rising inflation often leads to increased interest rates by central banks to curb inflation.

Higher interest rates make holding cryptocurrencies less attractive compared to traditional assets, as investors can earn a higher return with minimal risk in government bonds. This reduced demand for cryptocurrencies can lead to a decline in their price.

Expert Insights:

“The U.S. CPI release has injected uncertainty into the market, potentially triggering a shift in sentiment,” said Edul Patel, CEO of Mudrex. “Bitcoin’s support now stands at $67,700, indicating potential further declines if the price breaks below it.”

“Today’s CPI announcement could introduce further volatility into the market,” added the CoinDCX Research Team. “Traders should be cautious and manage their risk exposure accordingly.”

Technical Analysis:

“Bitcoin’s recent fall below the ascending channel support indicates a potential shift in market sentiment,” said Sathvik Vishwanath, Co-Founder & CEO of Unocoin. “Key resistance levels now stand at $71,425 and $72,740, while support is located at $67,525.”

The Road Ahead:

The market is closely monitoring the reaction of the U.S. Federal Reserve to the inflation data. If the Fed decides to raise interest rates sooner than anticipated, it could further pressure Bitcoin’s price.

On the other hand, if the Fed adopts a dovish stance and keeps interest rates unchanged, it could provide some support for the cryptocurrency market. Investors should remain vigilant and monitor the evolving situation to make informed trading decisions.