Bitcoin bounces as consumer price index hits 5.4% in July

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All eyes of the market are watching for reactions to the latest Consumer Price Index report with the July CPI figure calculated at 5.4% year on year.

Markets appeared to be scared, with investors appearing to rally to Bitcoin as the stock market stagnated and holders of US Treasury bonds despaired.

Bitcoin (BTC) instantly broke through the $ 46,000 resistance following the Consumer Price Index (CPI) report, and has been widely touted as a digital gold hedge against inflation by leading evangelists cryptography such as Senator Lummis.

Analysts had speculated that real inflation could drop to 5.3% from 5.4%, which would reassure worried investors – a drop could have given the USD a noticeable strengthening – but the CPI unchanged leaves things moving.

However, pessimistic expectations in the wake of the economic stress of the covid pandemic led to a bullish fever among crypto markets, with Bitcoin breaking the $ 46,000 resistance it fought this morning before the report was announced. .

Downward movements in stock markets indicate serious inflationary concerns among investors, and bond markets are watching closely for movements in yields, citing potential distortion on the part of the Fed and growing caution in the face of an increase in the dollar. inflation.

Market awareness is also reflecting on the Fed’s reactions to the CPI news, the centralized treasury aims to maintain inflation of 2% on average over time, and it sets this target using the separate spending index of personal consumption.

But the CPI is a more immediate measure of real futures price inflation, so it has a strong influence as it feeds into the Fed data.

Price action in crypto is reacting strongly to inflation data, indeed, the colloquially known base effect played a fundamental role in January’s bull run – so the high CPI can be seen as very big news. bullish for the industry.

But the base effect is fading away, as input and consumer goods prices have turned a corner as the US economy reopened after the covid pandemic.

The story continues

The high level of CPI inflation poses a serious threat to long-term inflation, stressed the President of the Federal Bank of Chicago.

The question is more: what will the outlook for inflation be over the next year, 2022, 2023, Charles Evans said at a press conference on Tuesday.

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