Bitcoin surges to $49,500 on concerns that 5%-plus inflation is likely to stay. Despite worries that the Federal Reserve would cut its monthly asset purchase program of $120 billion, a rush to so-called safe-haven cryptocurrencies has arisen.
In the aftermath of lower inflation data last Tuesday, the emphasis moved to the Federal Open Market Committee’s (FOMC) policy meeting on Sept. 18. Bitcoin (BTC) edged higher on Sept. 18 as the focus shifted to the FOMC policy meeting.
The BTC/USD exchange rate on the Coinbase platform approached $49,000, peaking at $48,825 before dropping owing to profit-taking. Nonetheless, the upward momentum fueled expectations that the pair might break beyond $50,000 in the following sessions, a psychologically significant threshold.
Inflation fears boost Bitcoin demand
Despite a lower consumer price index (CPI) data on September 13, concerns about increasing inflation continued to drive up Bitcoin prices.
According to statistics, the CPI in the United States climbed 5.3% year over year in August, up from 5.4% the previous month. The market responded to these numbers in varied ways, with some appreciating the fact that core inflation was lower than predicted, while others pointed out that inflation was still at outrageously high levels, with the CPI at 5.3% being one of the highest in more than a decade.
“I like to look at inflation statistics in a median perspective (rather than having one wild category driving it all)”, said Jens Nordvig, the founder of data analytics firm Exante Data.
The Federal Reserve may delay the scheduled tapering of its $120 billion monthly asset purchase strategy. According to TD Securities analysts, following the weaker-than-expected inflation report.
Furthermore, Anthony “Pomp” Pompliano, a partner of Pomp Investments, cautioned that a prolonged 5% inflation rate would cause Americans’ savings to vanish.
In this climate, the best way to protect yourself is to make sure you’re invested”, Pomp said in a message to clients.
Dollar goes up in tandem
On the day of the announcement of the inflation statistics, the BTC/USD exchange rate surged 4.85%.
On Wednesday, the pair gained another 2.17%, with prices ending above $48,000. In the next two sessions, their prices began to consolidate sideways, only to rise to $49,000 on Saturday.
Surprisingly, Bitcoin boosted the US dollar index (DXY). In the aftermath of the inflation report, macro investors moved the capital to assets they considered safe-havens. On Friday, the dollar index climbed 0.41% to 93.246, comparing the greenback to a basket of foreign currencies. It’s at its highest point since September.
The FOMC meeting next week should provide more clues for Bitcoin and the dollar markets.
Fed officials have agreed to start unwinding its loose monetary policies by the end of the year. This month’s nonfarm payroll (NFP) statistics were issued. However, it was discovered that the US labour market had not fully recovered.
As a result, the Fed would have to postpone its tapering plans. And any additional delay might lead to Bitcoin’s rise as well as the dollar’s depreciation.