Bitcoin price suddenly dips before climbing close to $19,000 on new CPI data
The US government reported a decrease in the headline consumer price index (CPI) and an increase in the core CPI, which are both in line with Bloomberg’s consensus but not as low as the market expected.
Reacting to this news, Bitcoin shed value before pushing back close to the $19,000 level.
Headline consumer prices decreased by 0.1% in December, according to the latest inflation report from the U.S. Bureau of Labor Statistics. The decline in the headline CPI was the biggest since April 2020 and was attributed to the steep drop in gasoline prices, which are now down 1.5% from a year ago, according to CNBC. On the other hand, the core CPI which excludes volatile components (food and energy) rose by 0.3% in December, compared with a 0.2% increase in November. On an annual basis, headline CPI rose 6.5% while core increased 5.7%.
Minutes into the CPI announcement, Bitcoin price went down from roughly $18,300 to just above $18,000. Buying pressure seemed to return pushing Bitcoin back up to $18,800.
WOO Network analyst Tiffany Wang said, “Today’s CPI print was in line with Bloomberg’s consensus, however, the market was expecting a miss.”
Wang said with the CPI news, the markets initially sold off risk assets. She said, however, looking at the breakdown, the shelter component exceeded the market expectations.
“The shelter in service was higher than the expectations,” she noted adding that “Zillow (the biggest U.S. real-estate marketplace) already indicated there was a decrease in rent and the CPI [December report] is just reflecting the ongoing contract renewal.”
“This means the service excluding shelter was below the expectation, which is good for the risk sentiment,” she said.
Better risk sentiment for the crypto market
The lower CPI along with the less hawkish tone of the Fed while showing a strong labor market is the bull case scenario for 2023. This means better risk sentiment for the crypto market.
Crypto innovations will lean on the lessons of the past year. The short-term pricing and reevaluation of the crypto assets will play against the extended backdrop of the Fed’s hawkish tone to curb the US inflation, the ongoing war in Ukraine, and the badly beaten trust of the wider population in the crypto industry.
Read the WOO Network’s crypto market outlook for 2023 here.
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