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Cryptocurrency Prices Surge as US Inflation Skids, SBF Arrest

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Cryptocurrency prices surged while American bond yields retreated after the latest American inflation data. Bitcoin surged to $17,800 while Ethereum surged to $1,300. In total, the market cap of all cryptocurrencies surged to more than $878 billion.

US inflation data

As I wrote on Saturday, America’s inflation declined for the second straight month as the price of gasoline pulled back. According to the Bureau of Labor Statistics, the headline consumer inflation dropped to 0.1% in November while core inflation plunged to 0.2%. Economists were expecting the number to come at 0.3% and 0.2%.

Inflation also plunged on a year-on-year basis. The data showed that the headline inflation dropped to 7.1% in November while core inflation dropped to 6.0%. These numbers show that the actions by the Fed are working.

There are more signs that inflation will continue falling in the coming months. For example, oil and gas prices have retreated in the past few months. Also, the key factors that pushed inflation higher a few months ago have reversed.

For example, global shipping costs have eased. Indeed, Maersk, the biggest sea shipping company in the world, fired its CEO after its revenue growth stalled. 

Federal Reserve decision next

The next key catalyst for cryptocurrency prices will be the upcoming interest rate decision by the Federal Reserve. With inflation easing, economists expect that the Fed will sound a bit dovish in its upcoming meeting. Precisely, they expect that the Fed will hike rates by 0.50% after rising by 0.75% in the past 4 meetings.

According to the WSJ, the Fed will then shift to smaller 0.25% increases in the first quarter of 2023. It will stop interest rate hikes in summer and observe trends in inflation. The only uncertainty is on the terminal rate hike.

Sam Bankman-Fried

Cryptocurrency prices also rose as the US indicted Sam Bankman-Fried (SBF), the founder of FTX. The CEO was arrested on Monday at the Bahamas. 

In its indictments, the US accuses SBF of conspiracy to defraud the US, wire fraud, securities fraud, and money laundering. As such, he faces more than a decade in prison. 

As I wrote on Saturday, cryptocurrency prices could recover after the collapse of FTX since it was a ponzi scheme all along. It could also lead to more adoption of decentralized exchanges like GMX and Uniswap.

Bitcoin

Bitcoin Price Could Get Extremely Ugly – Barrons

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Bitcoin (BTC/USD) price recent rebound has faded and its easy to see why. After soaring to a two-month high of $21,470, Bitcoin has pared back some of those gains to trade at $20,895. This decline is mostly because of the fundamentals and technicals of the coin as I will explain below.

Bitcoin Fundamentals

The main fundamental reason why Bitcoin is pulling back is the rising fears of a recession. A recent survey by WSJ placed the risk of a recession in the US at 61%. That is notable since it is the highest the figure has been in months. 

At the same time, Wall Street banks like Goldman Sachs, Citigroup, and Wells Fargo published weak financial results. Most of them said that their profits tumbled by more than 30% in the final quarter of 2022. Reading between the lines shows that most of them have allocated millions of dollars in credit loss provisons.

Historically, these provisions tend to rise when there is a fear of a recession. At the same time, many safe American companies have starte announcing substantial layoffs recently. Amazon is laying off 18,000 people while Microsoft, Salesforce, Meta Platforms are laying off thousands of workers. In a note, an analyst at Oanda said:

“Bitcoin prices are weakening as growth fears have Wall Street worried a…

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2 Reasons Why Bitcoin Price is Soaring in 2023

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Bitcoin price has staged a strong comeback in 2023 as investors rushed to buy the dip. The BTC/USD exchange rate surged to a high of 21,465, the highest level since November. It has risen by more than 30% from the lowest point in 2022. Here are the top reasons why BTC price is soaring.

Mild recession hopes

Bitcoin and other financial assets like stocks and gold have rallied because of the falling inflation in the United States and around the world. Consumer inflation dropped from 7.1% in November to 6.5% in December. Core inflation dropped to 5.7%. 

And on Wednesday, data from the US showed that wholesale prices dropped by 0.5% in December, higher than the expected 0.1%. The producer price index (PPI), rose by 6.2%, the lowest level since March 2021. This decline happened because of the falling energy prices.

Another data showed that retail sales tumbled in December. They dropped by 1.1% in December, the biggest decline in 2022. In a note, an analyst at RSM said:

“The lag impact of elevated inflation weighs heavily on U.S. households, it’s very clear that the median American consumer is still reeling from the loss of wages in inflation-adjusted terms.”

A recession is often seen as a bad thing. But in the financial assets, it can be seen as…

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Bitcoin Price is Getting Severely Overbought: Is it a Buy?

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Bitcoin price made a spectacular comeback in the past few days as investors reflect on encouraging data from the United States. The BTC/USD exchange rate surged to a high of $21,365, the highest point since November. It has risen by more than 35% from the lowest level in November. So, is the tide turning?

Will the Fed pivot?

Bitcoin and other global assets continued surging as investors reacted to the latest American economic data. Data published last week revealed that the American consumer inflation inched downward in December. It dropped to 6.5% in December, the sixth straight month of decline.

A week earlier, data by the Bureau of Labor Statistics (BLS) showed that the country’s unemployment rate dropped to 3.5% in December. In the same period, wage growth increased by 4.7%, lower than the previous month’s 5.2%. A decline in wage inflation is a positive sign for Bitcoin and other financial assets because of the Federal Reserve.

The Federal Reserve has been in a strong tightening phase in the past few months as it continues its battle against inflation. Its goal is to soften the economy and prevent a hard landing. Such a situation will happen when wage growth eases. 

Therefore, Bitcoin has risen because of the rising chances that the Fed will start to pivot. Historically, Bitcoin and other…

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