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Record US inflation reports cause temporary Bitcoin surge

Record US inflation reports cause temporary Bitcoin surge

Last updated 24th Jun 2022
Disclosure

After Friday’s key US inflation report, which showed an unprecedented growth rate of consumer prices in November, Bitcoin’s price swung up, then down, then up again. Consumer prices have not increased this fast in almost four decades.

Bitcoin down for one full month

Ultimately, Bitcoin is on track for a decline four weeks in a row. The forecasts of $100,000 by the end of 2021 seem overly bullish at this point. Even a return to last month’s all-time high seems unlikely.

Crypto investors were waiting for the US to release the consumer price index as many of them see Bitcoin as a potential hedge against inflation. According to the CPI report, the index is up 6.8% in the year through November. In May 1982, it was 6.9%. The cost-of-living increase was as predicted by economists in a Reuters survey.

Bitcoin passed $50,000 after the report was released, then returned to red as analysts reached the logical conclusion that record inflation could provoke the Federal Reserve to accelerate its withdrawal of monetary stimulus. Edward Moya of the brokerage Oanda told CoinDesk:

If financial markets grow nervous, the Fed may have an aggressive tightening cycle, and the first thing that gets sold is your top-performing assets and that would be cryptos for many traders.

Later on Friday, Bitcoin and traditional markets rose again as it emerged the inflation number wasn’t as high as some economists had warned.

Price movements

Solana’s blockchain experienced congestion, calling network reliability into question. On Thursday morning, it was unusually slow, which contributed to loss of value of the Solana coin. Polkadot and Terra also dropped amid massive crypto selloff. These native tokens were among the biggest losers on Friday morning as the cryptocurrency market in general declined.

However, fundamentals remain strong for Litecoin and other large-cap altcoins like Polkadot and Terra, the native token of the Luna network.

Impressive ConstitutionDAO liquidation

On Friday, crypto traders betting on the recently famous ConstitutionDAO’s PEOPLE tokens registered impressive liquidations – over $9 million according to Coinglass data. In November, just under 20,000 participants in the ConstitutionDAO auction raised $40 million to buy a copy of the U.S. Constitution.

This may have been one of the largest collective efforts of its kind involving cryptocurrencies, but the DAO lost out to Citadel hedge fund founder Ken Griffin. He bought the copy for the sum of $43 million.

Daniela Kirova

Daniela Kirova

Daniela is a writer at Bankless Times, covering the latest news on the cryptocurrency market and blockchain industry. She has over 15 years of experience as a writer, having ghostwritten for several online publications in the financial sector.