Bitcoin surged to a nine-month high of $25,484 in the minutes following the inflation announcement, then extended gains.
Galaxy's Head of Firmwide Research, Alex Thorn, will be sharing his insights on the complicated relationship between Bitcoin and inflation at Consensus 2023. This is particularly relevant as the Bureau of Labor Statistics (BLS) recently reported that February inflation in the US dropped to 0.4%, in line with expectations. However, the unexpectedly higher core rate of inflation raised some concerns.
Despite this, Bitcoin price prediction appears to be on the rise, reaching a nine-month high of $25,484 following the BLS report. This increase comes as inflation worries have taken a backseat to concerns about the potential systemic implications of multiple bank failures. As a result, traders have lowered their expectations of a Fed rate hike in March, which may continue to impact Bitcoin's price prediction in the near future.
Source: Tradingview| Bitcoin vs US Inflation Chart
A report released by Forbes says, “Bitcoin (BTC) is pro-cyclical due to institutional investors, and has a short-term inverse relationship with inflation increases — it can’t be said to beat inflation in the short-term as a hedge”
According to Forbes, there is a significant amount of investment interest associated with Bitcoin, particularly from institutional investors and big players like El Salvador, which is a sovereign buyer.
This interest in Bitcoin means that its performance tends to be correlated with major stock indices, and there may be some fluctuations due to more "Bitcoin-specific" news, such as the recent collapse of FTX. This correlation is largely due to the fact that the current interest in Bitcoin includes a significant speculative element.
Now, bitcoin has a short-term unfavourable link with inflation news because it increases the perception that central banks will increase interest rate targeting even more. When inflation rises, the price of bitcoin tends to fall.
In contrast, if inflation "slows," such as a positive reading of the US consumer price index, asset values, including bitcoin, would climb, with a view on the Federal Reserve and other central banks halting interest rate targeting rises.
Previously, On December 2022, Bitcoin (BTC) experienced a surge in price as investors prepared themselves for important U.S. data that was expected to show that the consumer price index (CPI) growth was slowing in response to the Federal Reserve's (Fed) aggressive liquidity tightening. Despite concerns about the health of major digital assets exchange Binance, the leading cryptocurrency approached $17,500, reaching levels post-market crash.
Bitcoin's link with inflation is a topic of ongoing discussion and analysis in the financial industry. Some analysts believe that Bitcoin, like gold, can act as a hedge against inflation due to its limited quantity and production. In this scenario, if inflation rises, the purchasing power of traditional currencies could decrease, leading to a possible increase in the value of Bitcoin.
Additionally, since Bitcoin is not tied to any government or financial institution, it may not be subject to the same inflationary pressures as other currencies. However, some argue that Bitcoin's volatility and lack of widespread adoption may make it a risky investment during inflationary periods. Overall, the relationship between Bitcoin and inflation remains a topic of debate, with many investors and experts providing different perspectives on Bitcoin price predictions.
Bitcoin is currently trading at $24,769.02 USD after breaking above the $26K barrier level, with a 24-hour trading volume of $47,817,673,621 USD. In the previous 24 hours, Bitcoin has dropped 4.65%. BTC is now ranked first on CoinMarketCap, with a market valuation of $478,494,582,742 USD. It has a total quantity of 21,000,000 BTC coins and a circulating supply of 19,318,268 BTC coins.
According to Bitcoin price predictions, BTC has resumed its upward trend and has continued to display optimistic indications till now. Many expect the situation to improve more for Bitcoin to continue its relief rally this month. Let's have a look at what the technical indicators are showing right now: