US CPI Jump Triggers Volatility in Crypto Market, Bitcoin Price Under Pressure

US CPI Jump Triggers Volatility in Crypto Market, Bitcoin Price Under Pressure

Crypto News – The recent increment in the U.S. Consumer Price Index (CPI) could potentially trigger significant fluctuations in the cryptocurrency market, particularly impacting Bitcoin (BTC), which might see its price dip below the $40,000 mark.

On Tuesday, the U.S. Labor Department disclosed a subtle month-over-month rise of 0.1% in the CPI for November, culminating in a 3.1% year-over-year increase. This increment slightly diverged from the projections of economists polled by Dow Jones, who had anticipated a stagnant rate with a 3.1% annual increase.

Despite the marginal monthly increase from October’s static CPI figure, the annual rate exhibited a minimal decrease, falling from the previous month’s 3.2%.

This slight jump in the US CPI is expected to stir up short-term volatility in the cryptocurrency market, as indicated by Santiment, a provider of on-chain data. Interestingly, Santiment’s analysis suggests that the current high level of discourse surrounding a bear market, typically characterized by fear, uncertainty, and doubt (FUD), often sets the stage for subsequent market recoveries.

At the time of reporting, Bitcoin’s price has declined by 2.1%, slipping below the $41,000 threshold. This downturn is evident, with a potential pullback looming beneath the $40,000 level.

In the face of this heightened market volatility, Santiment’s data reveals an interesting trend: Bitcoin is experiencing a modest resurgence in exchange platforms, signaling traders’ uncertainty. In contrast, a notable increase in Tether ($USDT) transactions on exchanges, up 6.9% from six months ago, hints at a growing bullish sentiment in the market.

Given the possibility of further corrections, esteemed cryptocurrency analyst Ali Martinez has pinpointed a significant support zone for Bitcoin, ranging between $37,150 and $38,360. This support level is reinforced by approximately 1.52 million addresses that collectively hold around 534,000 $BTC. Martinez also cautions about two key resistance levels at $43,850 and $46,400 that could impede Bitcoin’s upward trajectory.

Following the recent downturn in Bitcoin prices, there’s been a marked increase in entities holding over 1,000 $BTC. This trend suggests that major Bitcoin whales are taking advantage of the price decline to accumulate more of the digital currency.

All attention is now focused on the Federal Reserve. Having implemented rate hikes 11 times since March 2022 in response to the high U.S. CPI and inflation figures, it is anticipated that policymakers will signal the end of this current phase of policy tightening. This move could set the stage for potential rate reductions at a yet-to-be-determined pace. Future market projections currently point to a low likelihood of further rate hikes, with the first reduction expected around May.

Looking ahead to 2024, futures markets are forecasting a more aggressive easing policy from the Fed, with potential rate cuts reaching up to 1.25 percentage points by the year’s end. However, the CNBC Fed Survey presents a more conservative view, with respondents predicting the central bank will opt for a gradual approach, implementing around three rate cuts in quarter-percentage point increments.