- Bitcoin’s price faces a pullback due to concerns over rising U.S. inflation and potential interest rate hikes by the Federal Reserve.
- Traditional financial markets like the Nasdaq and S&P futures show a more positive outlook compared to the struggling cryptocurrency market.
- The decline in Bitcoin’s trading volume signals growing investor uncertainty amidst the ongoing market volatility and inflation concerns.
Bitcoin’s recent price surge has encountered a significant setback, as the effects of rising U.S. inflation reverberate across the financial landscape. After hitting a peak of $114,686, the cryptocurrency has started to lose momentum, now trading at $114,439.98, marking a slight 0.5% gain in the past 24 hours.
The U.S Consumer Price Index (CPI) has experienced a significant rise in inflation, which is 2.7% to 2.9%. This increase is an indicator of the fact that inflation is still a chronic problem in the economy, and this has wider implications on investment trends. Bitcoin, which had been on an upward trend, is currently susceptible to such economic pressure.
Interest rates of the Federal Reserve will influence risk assets.
With inflation on a continuous increase, investors are growing more concerned that the Federal Reserve will keep the interest rates steady or even higher. Risky assets such as Bitcoin are usually less attractive with an increase in interest rates. This has raised concerns that have caused a pullback in the price of Bitcoin, and its market sentiment has become more guarded.
Even though the cryptocurrency market is experiencing turmoil, the traditional market remains resilient. Nasdaq futures have risen by 0.35 as compared to S&P futures, which are rising by 0.27. It means that, in contrast to Bitcoin, Wall Street has not received a strong impact of the inflation issues and is more positive about the economic situation.
Bitcoin trading volume decreases with the rise in volatility.
Besides the price decline, Bitcoin has also reduced its volume of trading. The volume has also reduced by 12.35% to 47.94 billion, indicating a lack of investor confidence and a change in market dynamics. The lower trade and the fluctuation of prices are the elements that reveal the difficulty of Bitcoin in the present economic environment.
In the future, it is speculated that Bitcoin may have a revival in case the U.S government chooses to invest in Bitcoin with the help of the tariff money. Fred Krueger, a former Wall Street quant, proposed the U.S. might potentially raise to 50 billion every month in tariffs, potentially buying as many as 400,000 BTC. Such an action may significantly change the supply-demand patterns of Bitcoin that might trigger a new run-up.
