The cryptocurrency world has been experiencing what some investors have called “the crypto winter.” The crypto industry has suffered a significant loss in value this year, losing as much as $2 trillion since the peak of the general bullish trend in 2021.
The crypto markets have been showing a rather sluggish pattern the last few weeks, with investors concerned about the increase in interest rates and the general negative energy about the economy.
The world’s largest cryptocurrency and trendsetter, Bitcoin, has been trading in a range between $18,000 and $22,000 since the start of September 2022.
The flagship cryptocurrency exhibited unusual behavior for the first time in its history. The cryptocurrency’s 20-week moving average slipped below the 200-week moving average.
This is an indicator of what is known as a “death cross,” which occurs whenever the slower-moving average crosses above the faster-moving average, signifying a bearish market.
Bitcoin characteristically does not get close to its 200-week moving average, and it’s a rare event for the price to be at that point. Although this level was reached in the past, it was usually followed by a season of solid price increases. This might not be the case.
This time might be different as Bitcoin has not only failed to hold the level and has closed below it for more than ten weekly candles, but it has also failed to break past the level for the better part of September 2022.
Does This Mean Bitcoin Gets Affected By Inflation?
Bitcoin and other digital assets were usually seen as different and separate from other asset classes, so they could be good assets to help “hedge against inflation,” but that no longer appears to be the case. Analysts have begun to speculate that the whole crypto market is similar to the S&P 500.
The cryptocurrency market has pushed to become more mainstream and behaves similarly to the stock markets.
This is an unusually unpredictable period for cryptocurrency, even by its standards. Whether this pattern will hold and consolidate around these current levels or exhibit stranger behaviors in the coming months is inconclusive. There are expectations that Bitcoin will keep strong until the end of 2022, but the immediate future has been deemed relatively uncertain by macroeconomic conditions.
Will Upcoming Inflation Reports Affect The Bearish Trend?
Bitcoin has been bearish for a while now, although all that might change as analysts believe that a United States Inflation report due Thursday, 20th of October 2022, might be the necessary catalyst to drive the price of Bitcoin out of this uncharacteristically and unusually long “winter” of low price volatility.
The Labor Department is expected to report on Thursday, saying the core Consumer price index (CPI) increased to a year-to-year pace of 6.5% in September from the 6.3% it was in August, according to FactSet.
The core CPI of 6.5% would be the highest recorded over four decades. It explains the actions of the federal reserve officials attempting to return price stability to the norm by tightening monetary policy. This process exerts downward pressure on the prices of risky assets, from stocks to cryptocurrencies.
The analysts at JP Morgan stated that a too-hot CPI would have equities risking a 5% tumble. This could go on to affect risk assets, which are dependent on the CPI number. Risk assets like cryptocurrencies and equities could increase by 3%. This was according to Florián Giovannacci, the head of trading for Covario.
Since September, Bitcoin has been trading between $18,000 and $22,400.
So, the inflation report might be the needed push for the cryptocurrency to break out.
Conclusion
It is uncertain whether the cryptocurrency’s bearish outlook will continue long term or the inflation report will begin the rally for a long-awaited bullish run. Whatever the case, investors and cryptocurrency enthusiasts are intensely preparing themselves for the outcome.
When investors feel uncertain about their money, they look towards hedging. Since investors are looking for assets that can outperform high inflation regardless of whatever risk they may come with, it might be just what is needed to push the cryptocurrencies back into a bullish run.
