Bitcoin prices dropped below $33,000 after the London noon session on Tuesday, as traders watched the US inflation data to gain more clarity on the Federal Reserve’s timeline for tapering.
The spot BTC/USD exchange rate surged to as high as $33,330 but profit-taking sentiment turned its bids lower below $33,000. After the inflation data release, the pair dropped further to below $32,500, showing that traders did not treat the consumer prices results as bullish for the token.
What happened to CPI in June?
Prices paid by consumers in the US climbed in June, beating all downside forecasts.
According to Labor Department data released Tuesday, the US consumer-price index surged 0.9% in June and 5.4% on a year-over-year basis. Meanwhile, after excluding the volatile food and energy components, the core CPI readings came out to be 4.5% higher than June 2020 after rising 0.9%.
These price hikes served as another aftermath of the coronavirus pandemic. Consumers are paying more because of the supply-chain bottlenecks for day-to-day products. As a result, the US dollar index trades about 10% lower than its March 2020 peak of 102.79 — all while the economy reopens from the pandemic-led lockdown.
The Federal Reserve believes that the rising inflation is transitory, so it has decided to maintain its near-zero interest rate and $120bn monthly asset purchase policies until 2023. Meanwhile, the US central bank also said that at the end of its June FOMC meeting, it would hike rates at the end of 2023 if it sees inflation running too hot above its 2% benchmark target.
Bitcoin bullish, anyway
Bitcoin bulls, which thrives on a higher inflation narrative, mainly because it tends to hurt the dollar’s purchasing power, and boost the flagship cryptocurrency’s narrative as an alternative safe-haven, expect the price to reach higher in the long-term.
Inflation that runs higher too far too fast brings problems for savers whose wages do not rise in tandem. That prompts them to take their dollars elsewhere, benefiting easily available assets like Bitcoin in the process.
“With Bitcoin down 3.53% to $33,262, investors may use this lowered pricing to accumulate more coins, as the perception of the digital assets serving as a viable hedge against inflation has not waned,” Gustavo De La Torre, business development director at N.exchange, told FxDailyReport.com, adding:
“Should the buying sentiment rise, a price jump to $40,000 for Bitcoin is possible.”