- Bitcoin has portrayed weakness after slipping below $32,000 – the asset risks breaking below $30,000 by the end of the week.
- A recent report shows that US inflation is approaching the 2008 record levels.
Bitcoin has for the second day in a row, extended its decline to hit a 17 day low. The latest move sees the digital asset slip below $32,000, one of its critical supports. In the past, a breakdown has seen it find sufficient support at $30,000 before rebounding. In its drop, Bitcoin has managed to drag the wider market with it. Ethereum for instance has extended its weekly loss to over 20 percent after a 6 percent drop in the last 24 hours.
Altcoins have been hit hard by the recent move. A majority have wiped out between 5 percent and 10 percent. The total market cap has wiped out nearly 5 percent in the last 24 hours.
Bitcoin has in the last week wiped out roughly 8 percent according to our data. The downward trend comes despite recent data showing that traders have consistently been withdrawing their Bitcoin from centralized exchanges. The accumulation is viewed as a major sign of optimism on the price trend.
Read More: Bitcoin back in accumulation suggesting imminent breakout but institutions managing risk
For the last few weeks, market pundits have been divided on the direction that Bitcoin prices will take. One of the most controversial events that has analysts divided is the Grayscale Bitcoin trust shares unlocking. They have in part been blamed for the current volatility being witnessed in the market.
With prices in recent weeks stagnating, it is tipped that most holders will look to cash out. A majority of these investors bought in April when prices were at the peak of $65,000. According to the “Crypto, Fear & Greed Index,” investors are currently hanging on “extreme fear.”
Read More: JPMorgan strategists expects Bitcoin to reach $25,000 following Grayscale GBTC shares unlocking
Bitcoin set up for gains as inflation looms
Today’s drop is correlated to the global stock drop. This has been triggered by the recent report showing the rise of the U.S consumer price index which reached 5.4 percent compared with last year, and well above the 4.9 percent economists predicted. The report which was released on Tuesday revealed that the economy is strained with demand surpassing supply. The Fed and other global managers maintain that inflation will be transitionary. However, more economists and researchers including Deutsche Bank research strategist Jim Reid are convinced that inflation could last longer. Reid added;
Either that, or the transitory definition will have to be revised to cover several quarters rather than just months,”
This is good news for Bitcoin which is viewed as a hedge against inflation. Although the initial shock in the global markets tends to affect Bitcoin as well, the digital asset usually breaks away to act as a hedge against traditional markets.
