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Bitcoin lost its support at $18,600 and fell near its annual low at $17,900. The cryptocurrency managed to stop the bleeding at these levels, but the general sentiment in the markets seems to have turned from dubious to fearful.
At the time of writing, Bitcoin was trading at $18,300 with a 4% loss in the past 24 hours and a 9% loss in the past week, but it has recovered in the past hour. Other major cryptocurrencies followed the price of BTC into the abyss, posting huge short-term losses, with Cardano and Solana showing the worst performance.
Inflation has yet to bottom, will Bitcoin follow?
Data from Material Indicators shows a spike in selling pressure from all investors moving towards the Consumer Price Index (CPI), the benchmark for inflation in the United States. This statistic rose above market expectations and expressed 8.2% for the month of September 2022.
As can be seen in the chart below, from retail to whales, Bitcoin’s price is under pressure in another US Federal Reserve (Fed) rate hike. The financial institution has tried to slow inflation by raising rates and shrinking its balance sheet.
However, today’s CPI print confirms that inflation is sticky and unlikely to peak in 2022. This reality, along with positive economic growth numbers in the US, will give the Fed support to continue raising interest rates that negatively impact Bitcoin, the crypto market, and traditional finance.
The chart above shows the crypto market’s response to aggressive monetary policy from the Fed, but legacy markets have responded in a similar way. Commentary on the price action and inflation of BTC, an analyst for material indicators said:
Inflation may not have peaked yet, but the FED’s rate hikes will continue aggressively. 75 BPS ingrained for November 75 BPS likely for December TradFi and Crypto markets are bearish AF THE BOTTOM is not in.
Additional data from Caleb Franzen indicates that the market expects two more consecutive 75 basis points (bps) gains in the upcoming Federal Open Market Committee (FOMC). As a result, the price of BTC is experiencing high volatility caused by extreme market sentiment.
Investors appear to be pricing in an aggressive Fed with fewer and fewer chances of a shift in that direction, despite the enormous pressure being exerted on global markets. At the time of writing, $17,600 remains as strong support and $20,500 as critical resistance.
If Bitcoin moves above or below these levels, traders could expect a new low or a regain in previously lost territory. This pressure on world markets will continue as long as inflation developments remain upward.
CME futures now estimate a 95.8% chance that the Federal Reserve will raise its target fed funds rate by +0.75%.
Zero probability of +50bps, with the market re-pricing a 4.2% probability of +100bps.
Core CPI continues to rise, indicating that underlying inflation measures are hot. pic.twitter.com/CqKKebjRR9
— Caleb Franzen (@CalebFranzen) October 13, 2022