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The highly volatile crypto market can experience some dramatic changes in the most popular cryptocurrency known as Bitcoin (BTC). After the drastic fall from US$68k to US$17k, BTC price has started carrying a bear flag in the crypto market. This cryptocurrency is going through short-term volatility when the CPI (Consumer Price Index) numbers are released. But it has been observed that CPI is released every month while Bitcoin got affected in July 2022. CPI tends to instigate Bitcoin crypto investors to adjust their status in the crypto market accordingly.
Bitcoin had this major crypto crash in the crypto market due to extreme market conditions such as a high rate of inflation and many more external factors. The CPI release event can shift the dynamic of the crypto market with the high inflation as the hot and trending issue across the world, especially in the financial sector. It forces crypto investors to reposition portfolios while causing massive volatility in the BTC community.
As per the time of writing, the current BTC cryptocurrency price is US$21,282.53 with a market cap of US$406.30 billion and a volume of US$25.13 billion. It has reduced the appeal of the cryptocurrency while carrying the bear crypto flag. It is highly beneficial for short-term investors with a buy-the-dip strategy but a huge loss opportunity for long-term BTC investors. Bitcoin was able to drive its cryptocurrency price higher from June 2022 to July 2022 ie. from US$17k to US$21k.
It has been speculated that the higher the US CPI, the more the pressure on BTC price— with the due effect of the US Federal Reserve's strict policy regarding further interest rate hikes. The cryptocurrency investors observe the CPI very carefully because its use as a hedge against inflation by multiple crypto investors has increased to the highest level.
Meanwhile, CPI is known for measuring the degree of inflation in an economy where the rising inflation affects the diminishing standard of living for the residents. It tends to increase the price of goods with less manufacturing leading to a huge loss of jobs. The CPI has increased by 9.1% from 2022 beginning through June. Higher interest rates can create a reduction in demand for Bitcoin by making interest-based securities more appealing. It can affect the cryptocurrency price while curbing the inflation with the shift in liquidity — more volatility and cryptocurrency price will be affected badly. Bitcoin will continue to tighten under a high inflation rate as well as a very low liquidity ecosystem.
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