Bitcoin and other cryptocurrencies are gaining popularity as the US inflation rate hits its highest level in years.
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The Bitcoin surge has been attributed to increased institutional investor demand, with many considering it a greater store of value than traditional fiat currencies.
Moreover, the bullish sentiment toward the future of digital assets is driving the market higher. Bitcoin and other cryptocurrencies may soon become viable alternatives to traditional currency systems as their adoption rises.
The Bureau of Labor Statistics US CPI figures are expected to be released at 13:30 GMT today.
The US CPI figures can have a major influence on the price of crypto assets. The crypto market usually experiences significant price movement when the CPI figures differ considerably from the standard. Given this, crypto investors must know how CPI changes can impact their investments and how to manage their portfolios effectively. So let us discuss what the CPI is and what to expect from it.
What Is the US Consumer Price Index (CPI), and How Does It Work?
The US Consumer Price Index (CPI) is an economic indicator that calculates the average change in price over time for a variety of goods and services.
It is used to measure the US inflation rate and also to evaluate changes in purchasing power.
The CPI calculation takes into consideration a wide range of factors, including changes in the price of commodities like food, housing, transportation, and healthcare. Economists can spot trends in consumer buying habits and predict potential inflation rates by studying the CPI statistics over time.
Understanding how the US CPI works is necessary for making informed investment decisions and managing personal finances.
How Do CPI Changes Affect the Price of Crypto?
The price of cryptocurrencies can be impacted by changes in the CPI in both positive and negative ways. Investors looking for inflation hedges could demand more crypto assets as a result of inflationary pressures from higher CPI statistics, whereas deflationary pressures from lower CPI figures could result in less demand and higher volatility in cryptocurrency prices.
In the United States, inflation is expected to have dropped for the sixth consecutive month in December 2022, dropping to 6.5% (from 7.1% in November), the lowest level since October 2021. The CPI is expected to level out in the following months after rising for four months straight and by 0.1% in November.
The annual rate of core inflation is forecast to decline to 5.7%, the lowest level in a year, while the monthly rate of core inflation is predicted to rise at a slightly faster rate of 0.3% compared to 0.2% in November.
Though the inflation rate of 9.1% in June 2022 may have been its highest ever, it nevertheless represents a general rise in the price level, particularly in the services sector, and is more than three times above the Fed's 2% target.
CPI Outcome Prediction for Bitcoin
We can expect two results from today's CPI statistics now that you are aware of what CPI is and how it influences the cryptocurrency market.
The price of cryptocurrencies could rise if the CPI figures exceeded analysts' estimates of 6.5%. The next resistance level of $19,000 or $19,450 could be reached by Bitcoin if it manages to overcome the $18,250 immediate double-top resistance level.
Alternately, lower-than-expected CPI statistics of 6.5% could trigger a cryptocurrency market sell-off, driving BTC toward the $17,500 support level.