With rate hikes, a threat to the crypto bull market, inflation hitting a four-decade high but dropping from last month is seen as positive.
On Friday, Bitcoin hit $50,150 in tandem with the stock markets as US inflation reached a nearly four-decade high in November.
But soon after, BTC dropped to $47,000 and on Saturday went even lower. As of writing, BTC/USD is trading above $48k.
The $ETH daily chart looked like death an hour ago
just had a false (downside) breakout
if that happens in a high funding environment price tanks 15% like a rock
needs to recover 4K and consolidate above to calm those on the brink of selling$BTC looks much stronger
— Alex Krüger (@krugermacro) December 11, 2021
Meanwhile, S&P 500 continued to show strength and hit a new record high. All three major U.S. stock indexes advanced, actually, with the crypto market lagging. This is unlike what we have been seeing this year as Bitcoin’s correlation with stocks continues to increase thanks to its institutionalization.
This is why crypto trader Kaleo remains bullish on crypto and expects Bitcoin to resume its rally just like it did this summer when it lagged equity markets only to catch up later.
“Same sh*t is gonna happen again,” he said.
May I present, my global macro leading indicator. There is a gap between CT’s perception of the state of global trad markets and reality. pic.twitter.com/zTFOelin2T
— Kyle Davies (@kyled116) December 11, 2021
The record gains were posted by traditional markets due to the inflation reading being in line with the consensus.
The Labor Department said the consumer price index rose 6.8% in November from the same month a year ago, representing the fastest pace since 1982 and the sixth straight month of inflation rising and topping 5%.
The index, which measures what consumers pay for goods and services, reported a 0.8% spike in November after rising 0.9% in October.
President Joe Biden said on Friday that while inflation is a “real problem” primarily driven by severe supply chain problems, he feels it has now peaked.
“I think it’s the peak of the crisis,” Biden told CNN.
This is a good result for the markets.
Inflation was as forecast. But GDP -75% worse than forecast.
Inflation as expected, with a weak economy, means taper/rate plans likely stay as is.
Hence why we are seeing the S&P (and BTC) rally. https://t.co/jFTEaoQhAb
— Charles Edwards (@caprioleio) December 10, 2021
“Peak inflation is behind. Inflation topped,” noted trader and economist Alex Kruger. “That’s very bullish. Continued high inflation would trigger the Fed to accelerate the rates hiking process and is the single most important threat to the crypto bull market.”
Amidst this, JPMorgan Chase still advanced the forecast of the Fed’s first interest rate hike from September 2022 to June. The bank also expects the Federal Reserve to accelerate the reduction of asset purchases and end the tapering process by mid-March.
The latest weakness in the market has the participants concerned if the crypto bull market is intact or if it is the beginning of a multi-year bear market that brings immense pain and more than 99% drawdown.
The Crypto Fear and Greed Index also shows sentiments of “extreme fear” with a reading of 16, the same as late July.
All of CT is bearish rn so just remember
if we lose this level
it would mean that for the first time in the entire history of crypto without a single exception: CT was right
— fooo (@bitcoinpanda69) December 10, 2021
But some are still hopeful, given that the stock market is printing green. The year-end weakness could also be investors just locking in profit to fulfill their tax obligations.