Bitcoin (bitcoinAlex Krüger, founder of New York-based asset manager Aike Capital, warned that U.S. inflation data on Wednesday could eventually fall to the low $30,000s if U.S. inflation data comes out higher than expected.

market expect The widely watched consumer price index (CPI) rose 7.1% in the year to December and was up 0.4% month-on-month. The surge underscores why Fed officials have been supporting the normalization of their monetary policy faster than previously expected.

Further supporting their preparations is the normalisation of the labour market, including rising incomes and falling unemployment, according to figures released on Jan. 7.

“Crypto assets are at the very end of the risk curve,” tweet As they benefited from the Fed’s “unusually loose monetary policy,” Kruger added on Sunday, they could arguably suffer as the “unexpectedly tightening” policy moves money into safer asset classes.

extract:

“Bitcoin is now a macro asset that can be traded as a proxy for liquidity conditions. As liquidity dwindles, now competing macro players sell bitcoin and all cryptocurrencies follow.”

First rate hike in March 2022?

Fed been buying Since March 2020, $80 billion worth of government bonds and $40 billion worth of mortgage-backed securities have been issued monthly. At the same time, the U.S. central bank has kept its benchmark interest rate close to zero, reducing the cost of lending to individuals and businesses.

But the collateral damage of loose monetary policy is higher inflation, which up to 6.8% November 2021, the highest level in nearly four years.

So now the Fed, once declared that rising consumer prices is “temporary” has shifted its stance from not expecting no rate hikes in 2022 to discussing three rate hikes while the balance sheet is normalizing.

Leo Grohowski, Chief Investment Officer, Bank of New York Mellon Wealth Management, tell CNBC,Add to:

“Most market participants expect higher rates and looser monetary policy, but when you see the fed funds signal a 90% chance of a rate hike in March, it’s only 63% on New Year’s Eve.”

Mini bear market?

Mike McGlone, senior commodity strategist at Bloomberg Intelligence, Call $40,000 is an important support level for the Bitcoin market. Additionally, he expects cryptocurrencies to eventually come out of a bearish phase as the world becomes digital and takes BTC as collateral.

The statement came as Bitcoin fell from Nov. 8 record $69,000 It is now over 40%. Eric Ervin, chief executive of Blockforce Capital, said the decline mostly washed away recent investors, leaving the market for long-term holders.

This could be a “Mini Bears” the executive told Bloomberg, adding that the correction is “completely normal” for crypto investors.

related: Bitcoin sees classic rally at $40.70 as BTC price recovers from January 2021

Krueger also noted that Bitcoin has fallen too far from record highs, for now Technically oversold. Therefore, if the CPI reading unexpectedly falls, the market may expect a period of uptrend and trend in the BTC price.

“There will be U.S. inflation data on Wednesday,” Kruger said, adding:

“Think that the price should be down around 41k and 44k before then, and given how strong the rejection of the lows is, the price is sloping up.”

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