Demand For Bitcoin, Ether Increases As U.S. Inflation Rate Accelerates To A 40-Year High
By Dmytro Kharkov – February 12, 2022
The increasing inflation in the US continues to push serious concerns. According to the latest data, the Consumer Price Index (CPI) has reached the level of 7.5% per year, indicating the highest inflation rate since February 1982. The inflation growth equals 0.6 percentage points compared with the rate published in the last month.
The statistics confirm the minimal effectiveness of measures taken by the Federal Reserve and other government agencies in controlling inflation in the country. Another problem is the stagnating salaries in the country as they tend to increase only at the rate of 0.1% during the same period. Thus, the real wages and salaries continue diminishing, leading to the severe criticism of government policies.
Under these conditions, the growing number of private investors and ordinary citizens have shifted their attention to the crypto industry as they believe the leading cryptocurrencies, such as Bitcoin and Ethereum offer a reliable solution to the existing inflation pressure.
Bitcoin constitutes the major interest in this regard because it is the established crypto leader with a fixed maximum supply (in contrast with Ether and some other cryptocurrencies specialized in smart contracts’ solutions). The changes in people’s preferences and structure of their demand for various assets may largely explain the recent appreciation of Bitcoin and the entire crypto market.
At the same time, the future dynamics of crypto prices remain uncertain due to the prevalence of the following contradictory factors. On one hand, the reorientation of some proportion of the population to the crypto industry will imply the emergence of additional preconditions for the major cryptocurrencies’ growth in the following months.
On the other hand, the Federal Reserve’s officials may have to adopt more contractionary measures due to the extensive criticism of their policies. For example, the market analyst Sven Henrich recommends the entire Federal Reserve Board resign. Thus, they may have to significantly increase the base interest rate beyond the initial market expectations.
In this case, crypto investors may lack access to liquid and cheap resources that may be used for purchasing BTC, ETH, and other cryptocurrencies. Overall, the following weeks may still be characterized by the high degree of market uncertainty with the prevalence of various contradictory factors that may lead to different outcomes. Therefore, the Bitcoin price may remain to change in the horizontal channel of $40,000-$45,000 until new fundamental macroeconomic factors emerge with corresponding implications for investors’ strategies.
DISCLAIMER: None Of The Information You Read On ZyCrypto Should Be Regarded As Investment Advice. Cryptocurrencies Are Highly Volatile, Conduct Your Own Research Before Making Any Investment Decisions.
Article reposted on Markethive by Jeffrey Sloe
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