Crypto markets are soaring as US inflation rates reach their highest rate in years. Bitcoin has seen a surge in demand from institutional investors, making it a more attractive option than traditional fiat currencies.
The bullish sentiment from crypto bulls is driving the market higher and the increasing acceptance of cryptocurrencies is a testament to its increasing popularity.
Today, investors are awaiting the US Consumer Price Index (CPI) figures, to be released at 13:30 GMT. A large deviation from the CPI figures can have a significant impact on the value of crypto assets. Therefore, crypto investors must be aware of how changes to the CPI could affect their investments and how to manage their portfolios accordingly.
What Is the US Consumer Price Index and How Does It Work?
The Consumer Price Index (CPI) is an economic indicator used to measure the average price change of a basket of goods and services over time. It is used to measure inflation in the United States, as well as to evaluate changes in purchasing power.
The CPI calculation takes into account changes in the pricing of food, housing and transportation, among other factors. By tracking CPI over time, analysts are able to identify consumer spending trends and make predictions about future inflation rates. Understanding how the CPI works can help you make informed investments and manage your finances.
What Are the Effects of Changes in the CPI on Cryptocurrency Prices?
Changes in the CPI can have both positive and negative effects on cryptocurrency prices. Investors seeking inflation hedges may see increased demand for crypto assets, while deflationary forces that result in lower CPI numbers could lead to reduced demand and volatility in cryptocurrency prices.
Inflation in the US is expected to remain at 6.5% for the sixth consecutive month in December 2022 (from 7.1% in November), marking the lowest level since October 2021. Core inflation is projected to increase from 0.2% in November to 0.3% in December 2022.
The June 2022 inflation rate of 9.1% is the highest in a while, indicating a general rise in the cost of goods and services. The rate is also three times higher than the target of 2 percent set by the Federal Reserve.
Bitcoin Price Prediction Based on CPI Data
Now that you know what CPI is and how it affects cryptocurrency markets, you can expect two outcomes from today’s CPI figures. If the CPI numbers exceed analyst expectations of 6.5%, cryptocurrency prices could surge, pushing the market higher and breaking the $18,250 overhead resistance level. Bitcoin could be aiming at $19,000 or $19,500.
Alternatively, a lower than expected 6.5% CPI figure could result in a cryptocurrency market selloff and push BTC towards the $17,500 support area.
