Bitcoin And Ethereum Jump As US Inflation Reaches 40-Year High
Bitcoin and Ethereum have jumped after United States inflation figures came in higher than expected.
December monthly inflation in the US reached 0.5% with annual CPI reaching 7.0%. The figure is the biggest year-on-year increase since June 1982.
Bitcoin consequently jumped from USD 43,400 to USD 43,900 in the minutes following the announcement of the numbers. Meanwhile, Ethereum saw a daily gain of 8%, reaching USD 3,375. Both cryptocurrencies had previously been facing a bear market.
Speaking on Tuesday, Federal Reserve Chairman Jerome Powell said rate hikes and tighter policy will be needed to control inflation.
“As we move through this year … if things develop as expected, we’ll be normalizing policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” he told committee members. “At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy.”
“If we see inflation persisting at high levels longer than expected, then if we have to raise interest more over time, we will,” Powell said. “We will use our tools to get inflation back.”
UK-based digital asset broker GlobalBlock analyst Marcus Sotiriou believes a crypto selloff could be seen with high inflation numbers but it would be short-lived as “the market has already priced in the worst-case scenario due to the persistent selling recently.”
In QCP Capital’s most recent market update, the firm suggested that Bitcoin and Ethereum may have already found a resistance floor.
“One key reason for the lack of follow through in BTC and ETH below 40,000 and 3,000 is possibly because of the few large players owning strikes around those levels,” the report states.
“They naturally create support as they bid for spot to trade the delta there. And when they take take profit on those option positions the upside impact on the market is very clear as well.”