- Bitcoin dropped alongside stocks following the US inflation which was higher than anticipated at 7.5% annually
- BTC price fell below $44k and recovered to $45k after analysts described potential movements for the main cryptocurrency.
Bitcoin prices broke through a key barrier on Wednesday and reached $45,201 overnight. Then, the market fell when early trades began after US markets opened.
Analysts’ take on Bitcoin’s outlook
Investors absorbed new US inflation data, which showed that the rate of inflation was 7.5% year-over-year, versus 7.3% expected. This led to the earlier drawdown. Risk-on assets such as crypto and equities reacted lower, with all eyes now on the Federal Reserve’s rate hike slated for March.
The S&P 500 fell 0.23%, the Nasdaq composite dropped -0.18%, and the Dow Jones Industrial Average was just above the flatline.
Crypto trader and analyst Michael van de Poppe observed:
“The Consumer Price Index (CPI) results for the U.S.A. are coming in at 7.5% year-over-year, the expectations were 7.3% year-over-year.$DXY is shooting up and risk-on assets are dropping down like Bitcoin & equities.Likelihood that the FED will start rate hikes in March.”
Crypto trader Cantering Clark says Bitcoin’s dip from intraday highs has brought it back into range. Cantering Clark suggests that the cryptocurrency’s recent upward momentum will continue if stocks slip. According to him, the key is that BTC should hold above $43k.
And then back to the range. If the indices drop to 43k and BTC holds at 43k, I expect that we will just resume our upward trend.
If any of these pieces of criteria are changed, I expect that we see 41.5 drop to 39 in the next area for support. pic.twitter.com/XQmpFgIGs1
— Cantering Clark (@CanteringClark) February 10, 2022
Rekt Capital, another analyst, believes the rally may not be over based upon the Fear & Greed investor sentiment metric. He notes that at the moment, sentiment towards Bitcoin “is neutral.”
“Extreme Greed precedes local tops. The sentiment alone does not indicate that the BTC rally will end soon. Key levels such as $43100 & the 50-week EMA flipping into support would confirm this,” he tweeted.
The BTC/USD weekly chart shows that the 50-week exponential moving mean (EMA) stands at $44,200.
BTC/USD Weekly Chart Source: TradingView
If Bitcoin recovers from today’s slump and breaks above the highlighted EMA and $45k level, analyst Ali Martinez says the main barrier will be around $48,000. Above that, the psychological $50,000 will be in play.
— Ali Martinez (@ali_charts) February 10, 2022
Bitcoin’s inflation hedge status
Bitcoin’s plunge on Thursday alongside stocks saw it continue the high correlation it’s shown with the traditional finance markets since its peak at $69,000 in November 2021. Analysts believe this means that BTC isn’t a better hedge against inflation and a store of worth.
On Tuesday, Bank of America pointed out that Bitcoin was no longer a “good” inflation hedge given its volatility and lockstep trading with the S&P 500 and Nasdaq.
Cameron Winklevoss, co-founder of Gemini, believes that Bitcoin is still the best way to hedge against inflation. He adds to other calls from the crypto community and mainstream investors.
January saw inflation of 7.5%. This is the highest level in over four decades. It continues to accelerate.
The best way to shield yourself from this pernicious, silent tax on your life’s work — your blood, sweat, and tears — is bitcoin.
— Cameron Winklevoss (@cameron) February 10, 2022
The BTC/USD pairing was hovering at $44,900 as of the writing. That’s 2% higher than the 24 hours prior. The cryptocurrency has posted gains of around 22% over the past week.