Bitcoin fell below $40,000 for the first time since September and could fall to $30,000 if inflation in the U.S. increases more than forecasts. The market situation will be judged after the publication of the report of the U.S. Federal Reserve (Fed) on January 12.
Economist Alex Krueger, founder of the New York-based asset management firm Aike Capital, wrote about it in his Twitter. He noted that the U.S. consumer price index (CPI) for December is expected to be 7.1% year over year and 0.4% month over month.
Such high inflation figures are spurring the Fed to accelerate its tightening of monetary policy. For this reason, leading cryptocurrencies fell 15-30% in early January.
“Crypto-assets are at the farthest end of the risk curve,” Krueger writes. Against this backdrop, he says, an unexpectedly tougher Fed policy could hit digital assets hard as investors move their money into more predictable instruments.
“Bitcoin is now a macro asset that trades as an indicator of liquidity conditions. As liquidity declines, macro players sell bitcoins and all cryptocurrencies follow,” Krueger added.
The analyst recommends that investors remain cautious until the end of the first quarter. He sees two possible outcomes from the Fed’s future publication:
- If CPI falls, cryptocurrency prices will rise for a while;
- if the CPI rises, bitcoin will rush to $30,000 and the other coins will follow.
At the same time, the head of Aike Capital is sure that the dynamics of consumer prices will not immediately, but will go down. He sees three reasons for this: a tightening of monetary policy, the settlement of problems in supply chains and the dominance of deflationary forces on the long-term horizon.
It is worth noting that as part of its fight against inflation, the Fed announced a phased-in interest rate hike on Jan. 5. For the first time it will be raised to 1% as early as 2022. After that, the indicator will be revised three times in 2023 and twice in 2024.
Against this background, on January 10, the value of the Bitcoin fell below $40 thousand. According to the cryptocurrency exchange, as of 11:00 the rate of BTC rose to $42 thousand.
Other crypto-experts believe that bitcoin can grow up to $100 thousand after implementing solutions to scale the network, the first cryptocurrency can “bite off” a share of gold in the investment market.