Bitcoin crash ahead? Expert warns higher inflation could whip BTC price to $30K

Bitcoin
(BTC)
may
end
up
falling
to
as
low
as
$30,000
if
the
U.S.
inflation
data
to
be
released
on
Wednesday
comes
any
higher
than
forecasted,
warns
Alex
Krüger,
founder
of
Aike
Capital,
a
New
York-based
asset
management
firm.

The
market

expects

the
widely-followed
consumer
price
index
(CPI)
to
rise
7.1%
for
the
year
through
December
and
0.4%
month-over-month.
This
surge
highlights
why
the
U.S.
Federal
Reserve
officials
have
been
rooting
for
a
faster
normalization
of
their
monetary
policy
than
anticipated
earlier.


U.S.
headline
inflation.
Source:
Bureau
of
Labor
Statistics,
Bloomberg

Further
supporting
their
preparation
is
a
normalizing
labor
market,
including
a
rise
in
income
and
falling
unemployment
claims,
according
to
data
released
on
Jan.
7.

“Crypto
assets
are
at
the
furthest
end
of
the
risk
curve,”

tweeted

Krüger
on
Sunday,
adding
that
since
they
had
benefited
from
the
Fed’s
“extraordinarily
lax
monetary
policy,”
it
should
suffice
to
say
that
they
would
suffer
as
an
“unexpectedly
tighter”
policy
shifts
money
into
safer
asset
classes.

Excerpts:

“Bitcoin
is
now
a
macro
asset
that
trades
as
a
proxy
for
liquidity
conditions.
As
liquidity
diminishes,
macro
players
now
in
the
fray
sell
bitcoin,
and
all
of
the
crypto
follows.”

The
first
interest
rate
hike
in
March
2022?

The
Fed

has
been
buying

$80
billion
worth
of
government
bonds
and
$40
billion
worth
of
mortgage-backed
securities
every
month
since
March
2020.
Meanwhile,
the
U.S.
central
bank
has
kept
its
benchmark
interest
rates
near
zero,
thus
making
lending
to
individuals
and
businesses
cheaper.


BTC/USD
vs.
Fed
balance
sheet.
Source:
TradingView

But
the
collateral
damage
of
a
loose
monetary
policy
is
higher
inflation,
which

reached
6.8%

in
Nov.
2021,
the
highest
in
almost
four
decades.

So
now
the
Fed,
which
once
claimed
that
rising
consumer
prices
are
transitory,”
has
switched
its
stance
from
expecting
no
rate
hikes
in
2022
to
discussing
three
hikes
alongside
their
balance
sheet
normalization.

“It’s
more
dramatic
than
what
we
anticipated
and
the
Fed’s
pivot
to
a
more
hawkish
stance
has
been
the
surprise,” Leo
Grohowski,
the
chief
investment
officer
of
BNY
Mellon
Wealth
Management,

told
CNBC
,
adding:

“Most
market
participants
expected
higher
rates,
less
accommodative
monetary
policy,
but
when
you
look
at
the
fed
funds
implying
a
90%
chance
of
a
hike
in
March,
on
New
Year’s
Eve
that
was
just
63%.”

Mini
bear
market?

Mike
McGlone,
the
senior
commodity
strategist
at
Bloomberg
Intelligence,

called

$40,000
an
important
support
level
in
the
Bitcoin
market.
Furthermore,
he
anticipated
that
the
cryptocurrency
would
eventually
come
out
of
its
bearish
phase
as
the
world
becomes
digital
and
treats
BTC
as
collateral.


BTC/USD
daily
price
chart
featuring
$40K-level’s
history
as
support.
Source:
TradingView

The
statement
arrived
as
Bitcoin’s
drop
from
its
Nov.
8

record
high
of
$69,000

is
now
over
40%.
According
to Eric
Ervin,
chief
executive
officer
at
Blockforce
Capital,
the
drop
has
primarily
washed
off
recent
investors,
leaving
the
market
with
long-term
holders.

It
could
be
the
beginning
of
a
mini
bear
market
,”
the
executive
told
Bloomberg,
adding
that
such
corrections are
“completely
normal”
for
crypto
investors.



Related: Bitcoin
performs
classic
bounce
at
$40.7K
as
BTC
price
comes
full
circle
from
January
2021

Krüger
also
noted
that
Bitcoin
has
already
dropped
too
much
from
its
record
highs,
insofar
that
it
now
stands

technically
oversold
.
So,
if
the
CPI
reading
surprises
on
the
downside,
markets
could
expect
the
BTC
price
to
pop
and
trend
for
a
while.

“Wednesday
will
have
the
US
inflation
data,”
Krüger
said,
adding:

“Think
prices
should
chop
around
41k
and
44k
until
then,
with
an
upwards
skew
given
how
strong
the
rejection
of
the
lows
has
been.”

The
views
and
opinions
expressed
here
are
solely
those
of
the
author
and
do
not
necessarily
reflect
the
views
of
Cointelegraph.com.
Every
investment
and
trading
move
involves
risk,
you
should
conduct
your
own
research
when
making
a
decision.

read original article here