Despite the fact that inflation has undershot estimates, one analyst cautions that Bitcoin will still be vulnerable to the consequences from a “deflationary panic” among risk assets in the first quarter of 2019.
Bitcoin’s price makes a comeback as inflation in the US begins to ease.
Following the release of the Consumer Price Index (CPI) print for November that came in lower than expected, the Bitcoin to US Dollar exchange rate on Bitstamp reached $18,105, according to data from Cointelegraph Markets Pro and TradingView.
The report, which has been labelled the “most crucial” of the year, even exceeded the predictions of analysts with regard to the rate of inflation lowering.
The Consumer Price Index for November came in at 7.1% on an annual basis, which was below the 7.3% projection. Compared month-to-month, it was 0.1%, which was lower than the 0.3% that was projected.
An accompanying press statement stated that “the all items index climbed by 7.1 percent for the 12 months ending November; this was the smallest 12-month gain since the period ending December 2021.”
It shouldn’t come as a surprise that Bitcoin traders and experts received a boost from the influx of positivity that occurred.
A popular analytics resource known as Game of Trades responded in part to a tweet sent out prior to the opening of the Wall Street market by stating that “Massive short squeeze on its way in the market.”
Il Capo of Crypto, who is known for his more cautious approach to investing, shared with his followers that, despite the price increases, he had no current plans to invest in bitcoin.
He stated that although the CPI was better than projected, it was still very high.
“Price is currently building a lower high as it tests a significant resistance zone here. I have not entered the market in any way, shape, or form.”
An analyst at a crypto research firm called Reflexivity Research named Fejau was also wary. He warned of a “deflationary panic” that was still to come.
He made the announcement that “we are now entering the complacent Goldilocks phase of inflation.”
“The CPI coming in lower than predicted is bullish up until the first quarter of 2023, when it will transform into a deflationary panic. The final bottom around that time, then the market should improve until 2024. Have fun with your long gains, but make sure you don’t lose sight of the bigger picture.”
According to a report by Cointelegraph, the week will be filled with more than just the Consumer Price Index (CPI) statistics. The United States Federal Reserve is scheduled to decide on whether or not to raise interest rates in December, and Chair Jerome Powell is scheduled to speak on December 15.
According to the FedWatch Tool provided by CME Group, the general consensus was for a lesser raise of 50 basis points on the day, and the probability of this happening were just under 80%, up from 75% at the beginning of the week.
Chart depicting the Fed’s goal rate of probabilities CME Group is the source.
Already there is a diminishing dread of Binance
In the meantime, BTC/USD had been doing well even before the CPI announcement, displaying little sign of shakiness in the face of increased fear over developments involving the largest cryptocurrency exchange Binance.
The CEO, Changpeng Zhao, referred to the concerns as “FUD,” and they appeared in Reuters and on social media. Regardless, these fears spurred an exodus of user funds, which totalled over $500 million in BTC alone in just 24 hours.
Sam Bankman-Fried, the previous chief executive officer of the FTX exchange, was taken into custody in the Bahamas on the same day the scandal involving the FTX exchange broke out. The US Securities and Exchange Commission has accused him of defrauding customers of the FTX exchange.
Credit should be given to cointelegraph.com.