Global financial markets were once again on a downward trend since last night after the US reported that the Consumer Price Index (CPI) rose 8.6% year-on-year, its highest level since 1981. Bitcoin (BTC) is no exception to this influence.
US inflation increased sharply in May 2022 to the highest level since December 1981.
Costs related to housing, gasoline, and food prices contributed largely to the strong rise of CPI. Rising prices are eroding the purchasing power of workers. Real wages – excluding inflation – fell 0.6% in April 2022, although average hourly earnings rose 0.3%. Over the 12-month period, average hourly earnings fell by 3%.
The latest inflation figures dashed hopes that inflation may have peaked and fueled fears that the US economy is about to fall into a recession. The above inflation report comes as the US Federal Reserve (Fed) is still in the early stages of raising interest rates to fight inflation. The May report may increase the possibility that the Fed will raise interest rates by 50 basis points several times in the near future.
A sharp drop in US stocks on Friday meant Wall Street had its worst week in months. The Dow Jones Industrial Average lost 4.58%, recording its 10th weekly loss in the past 11 weeks. The S&P 500 and Nasdaq Composite dropped 5.05% and 5.6%, respectively, notching their ninth weekly loss in 10 weeks and their worst week since January 2022.
Bitcoin and altcoins
Hotter-than-expected CPI report led to a collapse of the $30,000 support and Bitcoin price pushed to a daily low of $28,852 before dip buyers attempted to push the price back above $29,000.
Market analyst Kevin Svenson also thinks the Fed’s failure to rein in inflation is likely to impact price action next year.
If Bitcoin price continues to trend lower, Altcoin trader Sherpa says it could trade below $28,000.
Market analyst CrediBULL Crypto provides insights on what to do to avoid a drop back towards the $28,000 support. He posted the following chart showing a “sad” retracement from the $30,000 area of Bitcoin. The analyst suggested that this is “a time where we need to take a closer look”.
Meanwhile, altcoins are still showing no signs of improvement. The largest altcoin Ethereum has now lost $1,700 and is trading at $1,666 with a drop of more than 6.7% on the day.
Recording the biggest loss in the past 24 hours was Convex Finance (CVX) when it lost up to 15%, followed by LINK (-12%) and KSM (-11%). In general, most of the coins in the top 100 are corrected down.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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