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Bitcoin Soars: Inflation Hedge or Crypto Crash Harbinger?


The Consumer Price Index (CPI), a crucial indicator of inflation, released hotter-than-expected readings, sending shockwaves through the financial markets.

Bitcoin and Ethereum, two leading cryptocurrencies, experienced a 4% decline in value following the CPI release.

Mark Chandler, Chief Market Strategist at Banic Burn Global Forex, provided insights into the CPI report.

According to Chandler, gasoline and shelter prices were key drivers of the rise in inflation, with the core rate of inflation remaining stubbornly high at 3.8%.

The strong CPI report raises questions about the Federal Reserve’s (Fed) plans to cut interest rates this year.

Chandler believes that the market had already downgraded the chances of a rate cut in June, and the CPI data further shifts the needle towards fewer cuts in 2024.

Despite the declining inflation expectations, Bitcoin has continued to rise this year, gaining over 60%.

Chandler attributes this to factors such as the launch of Bitcoin ETFs and increased demand for speculative assets.

However, he does not see a strong correlation between Bitcoin, gold, or interest rates in the US.

Chandler also discussed the potential impact of the halving, a scheduled reduction in the supply of Bitcoin, on its price.

While previous halvings led to significant price increases, Chandler believes the effect may be smaller this time due to the impact of Bitcoin ETFs.

The market is eagerly awaiting the release of the Fed’s March minutes later today, which may provide further clues about their stance on interest rates.

The Fed finds itself somewhat lagging behind other central banks, such as the Bank of Canada and the European Central Bank, which are expected to raise rates in the coming months.

  • Key Takeaways

CPI data raises concerns over Fed’s inflation-fighting strategy

The hotter-than-expected CPI readings and persisting core inflation raise doubts about the Fed’s planned rate cuts in 2024.

Bitcoin remains resilient amidst inflation worries

Despite declining inflation expectations, Bitcoin’s value has surged over 60% this year, driven by factors such as ETFs and speculative demand.

Halving event unlikely to have significant impact on Bitcoin price

The upcoming reduction in Bitcoin’s supply has historically boosted its price, but Chandler believes the effect may be muted this time due to Bitcoin ETFs.

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