Summary:
- Inflation in the U.S reached 8.9% according to the latest CPI report.
- Bitcoin reacted to the news with a dip in price below the $30K region.
- Crypto’s leading token remains down from previous highs in correlation with the US stock market.
- The S&P 500 index is down over 15% since December 2021.
- Some analysts predict more pain before relief or a rebound.
Bitcoin fell under the $30,000 level once again following the latest CPI report from the U.S. revealed that inflation has hit a 40-year high. According to the analysis, the annual CPI rate rose to 8.6%, the highest it has been since December 1981.
Consumer Price Index is a tool designed to measure the percentage change in prices of everyday items commonly bought by households. The CPI serves as an indicator of inflation in most economies.
In other words, it’s possible to monitor inflation rates by keeping an eye on the CPI as they’re interchangeable.
Inflation Shock Sends Bitcoin Below $30K
The panic from the worst inflation numbers in decades might have indeed triggered a slight BTC sell-off that dragged the leading crypto below $30,000 again in May. However, perhaps the dip was expected as analysts have established a correlation between Bitcoin and traditional equity markets like stocks.
Since December 2021, blue-chip stocks in the S&P 500 index have experienced a downtrend similar to the decline recorded across the crypto markets. At press time, the index is down over 15% with over $7 trillion wiped out from the stock market in 2022 alone.
Cryptocurrencies felt the impacts of a decline as well as the total crypto market cap has lost over $1 trillion and currently sits around $1.26 trillion.
While it is unclear whether the inflation panic will trigger further downward movement in the market, some technical analysts believe more pain for Bitcoin is possible. FX Pro senior market analysts Alex Kuptsikevich opined that bulls are unable to regain control of the market due to the prevailing negative sentiment and uncertainty.
Kuptsikevich added that rebound patterns are yet to form and we could be in for more dips in prices.
We should be prepared for the cryptocurrency market to test support at last week’s lows again in the near term. We consider the area near $20,000 the final target for a potential selloff, which corresponds to bitcoin’s long-term support line.
Other crypto proponents like Microstrategy Chief Michael Saylor argue BTC’s short-term volatility does not affect the bigger picture as long as the token’s fundamentals remain intact.