U.S. Inflation Data Puts Strong Pressure Bitcoin and Crypto, Here’s What to Expect

On Thursday, February 10, the U.S. Federal Reserve announced the inflation data for the month of January. The annual rate of inflation stood at a staggering 7.5%, its highest in three decades since 1982.

Well, the reaction of the news was instant in the U.S. equity market as well as the crypto market. The tech-heavy Nasdaq Composite corrected 2% on Thursday along with Bitcoin entering a 2.5% correction.

As a result, the Bitcoin price dropped all the way from above $45,000 and is currently trading at $43,500 levels. This has been the second pullback in the BTC price in the last 8 trading days.

Not just Bitcoin but the sell-off pressure is visible in the broader cryptocurrency market. The overall crypto market cap has slipped under $2 trillion once again. Along with Bitcoin, altcoins too have been dragged down.

Bitcoin-competitor Ethereum has lost 4.55 in the last 24 hours and is currently trading just above $3,100. Ether (ETH) faces a risk of a further slide to $3,000 levels. Almost all other top ten altcoins are down in the range of 4-10%.

However, the market sentiment has yet entered the stage of fear. As per the latest insights, the Bitcoin Fear and Greed Index stands at 50/100 which is “neutral”. Last month, the Bitcoin Fear and Greed Index had dropped in the “extreme fear” zone.

The inflation news has spread fear that the Federal Reserve is likely to turn hawkish this year in 2022. Analysts expect that the U.S. central bank can increase rates as much as seven times this year.

This will bring an end to the free flow of money in the markets as witnessed during the pandemic period. As result, we can see money moving out of equities and crypto to risk-off assets like fixed bonds.

Amid the Fed’s hawkish stand, the crypto market is likely to stay volatile throughout this year of 2022. However, throughout the pandemic, we have been seeing Bitcoin closely following the NASDAQ 100 index.

But last week was a surprise as we witnessed some decoupling. Despite the Nasdaq correcting, Bitcoin and the broader crypto space was up. It will be interesting to see as to what extent this decoupling happens. But one thing that appears is that despite pressure on the equity market, the interest in crypto remains fresh.