Bitcoin price rallies to $18,880 as US inflation rate drops to 6.5%
- Bitcoin price, along with the rest of the market, traded in the green on Thursday as the US Consumer Price Index (CPI) inflation rate eased to 6.5% in December.
- The December 2022 rate marked the smallest yearly increase in consumer prices since the 12-month period ending in October 2021.
- Bitcoin price is at a two-month high above $18,800 and could breach the $19,000 mark, provided the bullish momentum continues.
Bitcoin reacted positively to the announcement of the US Consumer Price Index (CPI) for the month of December 2022, as did the rest of the crypto market. Bullishness in the stock market is also expected over the next few days; however, as per some industry players, this good news might have been a one-time thing.
US inflation rate falls to yearly lows
The US Bureau of Labor Statistics released the CPI data for December 2022, as per which the year-on-year inflation rate has cooled down to 6.5% from 7.1% in November, meeting the market’s expectations.
The inflation rate reaching 6.5% also marked the smallest yearly increase in consumer prices observed since the 12-month period ending in October 2021.
The sixth consecutive monthly drop in annual CPI growth – from June’s 9.1% peak – points toward inflation being tamed and, therefore, fuels expectations the Federal Reserve would pursue smaller rate hikes.
Inflation rate over the last 12 months
However, some analysts are skeptical that the inflation down the path could sustain. According to stock broker and Euro Pacific Capital CEO Peter Schiff, inflation is set to rise again. Schiff tweeted,
A one-month, .1% dip in #CPI doesn't mean #inflation is cooling off. The core was up .3%, which annualizes to 4%, double the #Fed's 2% target. YoY CPI still rose 6.5% and with the dollar weakening, federal budget deficits & consumer credit soaring, inflation is poised to heat up.
— Peter Schiff (@PeterSchiff) January 12, 2023
Bitcoin price trumps expectations
Bitcoin price rallied against traders’ predictions as the king coin noted a 5.3% increase in value since the announcement of CPI data. Trading at $18,885 at the time of writing, BTC managed to chart a two-month high, potentially setting itself up to recover the losses noted in November 2022 following the FTX collapse.
Rising from $17,948, Bitcoin price flipped its immediate resistance at $18,162 into a support level. Continuing this positive momentum, BTC breached the lower limit of the resistance block at $18,721 to $19,244, titled the Fair Value Gap (FVG).
Over the next few trading sessions, if the broader market bullishness persists, the king coin would be able to reclaim the upper limit of the FVG at $19,244 into support as well. This would enable it to initiate a recovery rally.
BTC/USD 4-hour chart
However, if the fear in investors’ minds dominates the market, Bitcoin price could fall back to $18,162. Further decline would bring the price of the cryptocurrency to $17,577. At that point, traders and investors would need to be wary of as a daily close below this critical support level would invalidate the bullish thesis, pushing BTC to $17,000.
Author
Aaryamann Shrivastava
FXStreet
Aaryamann Shrivastava is a Cryptocurrency journalist and market analyst with over 1,000 articles under his name. Graduated with an Honours in Journalism, he has been part of the crypto industry for more than a year now.
