- US consumer prices rose 7.5% YoY in January, increasing pressure on the Federal Reserve to tighten policy.
- Historically, Bitcoin has enjoyed extended gains in response to rising inflation.
- With a spike in inflation, analysts expect the Federal Reserve to raise interest rates aggressively.
- Analysts have predicted a spike in Bitcoin price to $48,000 with multiple market catalysts.
Bitcoin holders consider the asset a hedge against inflation, keeping an eye on the Federal Reserve’s response to rising inflation. The increase in US consumer prices is the fastest since 1982, fueling concerns at the Federal Reserve.
Bitcoin could enjoy extended gains as a hedge against inflation
US consumer prices soared 7.5%, growing at the fastest pace in 40 years. The spike increased pressure on the Federal Reserve to tighten policy.
The Federal Reserve’s response to economic conditions could impact investor sentiment toward Bitcoin and crypto. Though the core Consumer Price Index (CPI) noted a 0.6% increase, the same pace as December 2021, there was a material increase in inflation.
With a limited supply, investors consider Bitcoin a hedge against inflation. Inflation has acted as a driver for extended gains in Bitcoin, as investors flock to BTC during times of uncertainty.
Analysts expect the Federal Reserve to aggressively raise interest rates, higher than previous forecasts. In a recent meeting, the Federal Reserve hinted at interest rate hikes starting in March 2022.
Proponents believe the recovery in the cryptocurrency market and Bitcoin price over the past two weeks was fueled by the Federal Reserve’s response to rising inflation. Though the idea that Bitcoin acts as a hedge against inflation is criticized for being theoretical, Scott Bauer, CEO of Prosper Trading Academy, believes that it could have partially contributed to the BTC price rally.
@FeraSY1, a crypto analyst and trader, believes if Bitcoin price sustains above $38,758, $49,000 could be the next target. The analyst noted a bearish divergence on the 4-hour candle, looking for an Inverse Head-and-Shoulders formation, predicting a subsequent rise after a bearish trend.
#bitcoin
— Crypto Feras (@FeraSY1) February 10, 2022
I don't like the combination of last few 4H candles, alongside with bearish div. on 4h
I will be looking for iH&S formation, with a strong condition that #BTC should NOT close any 4H candle below 38758$
if the iH&S got validated, 49K zone will be the target$btc https://t.co/2f20q2kzvW pic.twitter.com/pDMw1YCPj9
FXStreet analysts have predicted that Bitcoin price could stumble while the asset targets $50,000.
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