An image of Bitcoin and U.S. currency is displayed on a screen during the Interpol World Congress in Singapore on July 4, 2017.
The cryptocurrency market saw a decline on Tuesday, following a higher-than-expected Consumer Price Index (CPI). Bitcoin, which had reached its highest level in two years the day before, fell below the $50,000 mark to $48,535.17 according to Coin Metrics.
The U.S. Bureau of Labor Statistics reported a larger increase in the January CPI than anticipated by economists surveyed by Dow Jones. This caused a 10 basis point increase in the benchmark 10-year U.S. Treasury yield, raising concerns among investors about the pressure on risk assets. Some are worried that the Federal Reserve may not be able to decrease rates as frequently as expected.
Nico Cordeiro, Chief Investment Officer at Strix Leviathan, believes that the current cryptocurrency rally will continue for now. However, he warns that if inflation continues to run higher than expected, it could lead to weakness in the longer term. This goes against the common belief that bitcoin is a hedge against inflation, as Cordeiro sees it more as a measure of liquidity in the financial system.
Bitcoin fell to a critical level of $48,000, which is closely monitored by chart analysts and investors. A close above this level could signal a new high of $50,000 or even an all-time record, as the coin previously broke its record at $68,982.20 in November 2021.
The crypto exchange Coinbase and proxy Microstrategy both saw a 4% decrease, while miners CleanSpark, Iris Energy, and Marathon Digital experienced losses of 4%, 4%, and 9% respectively. Riot Platforms also saw a 5% decrease. However, these losses were mild compared to the double-digit gains seen the day before.
Elsewhere, Solana’s SOL token outperformed the market, hovering just above the previous day’s level after paring gains earlier. Yuya Hasegawa, a Crypto Market Analyst at Japanese bitcoin exchange Bitbank, noted that ethereum led the crypto rally on Monday with a 5.5% increase. This is due to the expectation of its next major technological upgrade, known as “Ethereum 2.0.” The crypto community has also shown renewed interest in non-fungible tokens (NFTs).
Hasegawa predicts that there may be a minor correction in the market in the coming week, but the overall upward trend is expected to continue due to improved demand through ETFs and positive technical sentiment.
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