Bitcoin traded below $74,000 on Wednesday as hotter-than-expected U.S. inflation data raised concerns of further interest rate hikes, piling pressure on cryptocurrencies.
Consumer prices rose 0.4% in October compared with the prior month, following a 0.6% increase in September, and above the 0.3% forecast by economists in a Wall Street Journal survey. High inflation increases the prospects for further interest rate hikes by the Federal Reserve. Higher rates raise the opportunity cost of holding non-yielding assets such as bitcoin and gold.
The strong upside surprise in October consumer inflation makes an interest-rate hike by the Fed in December all but certain, leaving only the size of the move to be determined, TD Securities' rates strategists said. Fed Governor Christopher Waller's speech, also on Tuesday, shifted the debate to whether the Federal Open Market Committee will opt for a 25- or a 50-basis-point increase, the analysts wrote.
Bitcoin traded broadly flat at $73,852, hovering just above an 11-week low. The leading cryptocurrency is down over 10% in the past month. Inflation fears have compounded bearish sentiment following the U.S. election results, as Democrat control of both chambers of Congress is due to make for a more challenging legislative environment for digital assets, crypto analysts said.
The possibility of a bearish long-term scenario for bitcoin can't be ruled out either, ING analyst Roelof-Jan van den Akker said. Bitcoin is down over 15% since touching $87,000 on Sept. 23, and Van den Akker said investors should be prepared for a market that remains vulnerable to renewed downside pressure, based on technical analysis. "While prices could temporarily stabilize within the $62,660-$58,020 support area, such consolidation would not necessarily invalidate the risk of a subsequent and more substantial decline," he wrote in a note.
Ether is 0.2% higher at $2,054.39, having fallen over 3% on Tuesday.
Comments