Inflation Hits New 40-Year High, Will Bitcoin And Ethereum Plummet Again?

Reynaldo Marquez

1 year ago

2 mins read

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Bitcoin and Ethereum have reacted negatively to the Consumer Price Index (CPI) print in the United States. The metric is used to measure inflation in the U.S. dollar and hit 9.1% for June which represents an increase from May’s results.

At that time, the crypto market crashed the following days after the CPI print. This meant inflation was still soaring and hinted at more intervention from the U.S. Federal Reserve (Fed). High inflation translated into high pain for Bitcoin and other risk-on assets.

At the time of writing, BTC’s price trades at $19,400 with a 3% loss in the last 24 hours. ETH’s price trades at $1,000 with a 3% loss in the last 24 hours hinting at potentially further losses for two larger cryptocurrencies by market capitalization.

Bitcoin BTC BTCUSD — BTC’s price trends to the downside on the 4-hour chart. Source: BTCUSD Tradingview

Economist Alex Krüger noted a 40% decline in the price of these digital assets and a 7% decline in the S&P 500. The downside price action is supported by the expectation that Fed will become more aggressive as inflation trends upwards. The economist said:

The last CPI number triggered a massive crash, with the S&P falling 7% in 2 days. Meanwhile the ensuing crypto crash was so intense that CPI could be relabeled as the Crypto Pain Index.

However, Krüger believes this time Bitcoin and Ethereum will be more impervious to the CPI print. The last time this metric became public it beat the market expectations, this time inflation stayed within expectations.

Thus, the impact from this metric might have been priced in. According to the economist, the market “has already sold off considerably since Sunday in anticipation” of June’s CPI.

Inflation might have reached a top, but Krüger believes there is stale data from different sectors used to measure inflation. This point to a decline in energy prices which should contribute to a drop in July’s CPI. This might provide some breathing room for Bitcoin and Ethereum.

Important context ahead of tomorrow’s CPI release:

Headline inflation from last month will be significantly affected by stale gas price data:

Retail prices have declined from the June avg and declining oil prices and gas futures suggest they have further to fall. pic.twitter.com/3wmwqHzRH3

— Brian Deese (@briandeeseNEC) July 12, 2022

Why Bitcoin Could Experience Relief In The Coming Months

In addition, the economist claims there are no large future events that could negatively impact BTC’s price. The Fed is set at a 75-basis point interest rate hike which has also been priced in by the market, following a capitulation event.

In the short term, the June CPI print might contribute to downside price action in the traditional market. As it has been happening over the past months, this selling pressure will spill over to the crypto market, but without turning into a “trend defining” event.

The key to a potential recovery will be on traditional equities. The crypto market will find a convincing bottom once stocks begin to trend upwards, and many believe these assets will see more pain over the coming months.

Market agreed with my view: inflation number is nothing alike June's, not trend defining.

Too much unjustified panic out there.

— Alex Krüger (@krugermacro) July 13, 2022

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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