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Bitcoin plunged along with stocks after US inflation came in hotter than expected at 7.5% year-over-year.
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After briefly falling below $44,000, BTC rebounded into the $45,000 range as analysts outlined potential moves for the flagship cryptocurrency.
Bitcoin price broke above a key barrier and traded as high as $45,201 overnight Wednesday before retreating as the wider market softened in early trading after US markets opened.
Analysts’ views on Bitcoin’s outlook
The earlier sell-off unfolded as investors digested fresh US inflation data that showed a 7.5% year-over-year rise versus the 7.3% forecast. Risk-on assets such as cryptocurrencies and equities reacted lower, with attention now shifting to the Federal Reserve’s potential rate hikes expected in March.
The S&P 500 fell 0.23% and the Nasdaq composite declined 0.18%, while the Dow Jones Industrial Average held slightly above flat.
Crypto trader and analyst Michael van de Poppe noted:
“The Consumer Price Index (CPI) result for the US comes in at 7.5% year-over-year while expectations were 7.3% year-over-year. $DXY spikes and risk assets drop. Probability of the FED starting rate hikes in March.”
Trader Cantering Clark said Bitcoin’s drop from intraday highs has brought it back into range. He suggested the cryptocurrency could resume its recent upward momentum if intraday lows hold. For him, the key level is BTC staying above $43,000.
And back in range.. If the low in the indices are in and 43k holds for BTC I expect us to just resume upward.
If either of those pieces of criteria change I expect we see 41.5 down to 39 for the next area of support. pic.twitter.com/XQmpFgIGs1
— HORSE (@TheFlowHorse) February 10, 2022
Another analyst, Rekt Capital, said the recent rally may not be over based on the fear-and-greed investor sentiment metric, which currently reads as “neutral” toward Bitcoin.
“Extreme greed precedes local tops. So based on sentiment alone, this BTC rally may not be close to being over yet. Key levels such as $43,100 and the 50-week EMA flipping to support would confirm this,” he tweeted.
On the weekly BTC/USD chart, the 50-week exponential moving average (EMA) sits near $44,200.
BTC/USD weekly chart. Source: TradingView
If Bitcoin recovers from today’s pullback and breaks above the highlighted EMA and the $45,000 level, analyst Ali Martinez said the next major resistance would be around $48,000. Clearing that level would bring the psychological $50,000 mark into play.
The real challenge for #Bitcoin sits around $48,000, where roughly 4.71 million addresses are holding 2.58 million $BTC. pic.twitter.com/vt4bxEN9jH
— Ali (@ali_charts) February 10, 2022
Bitcoin’s status as an inflation hedge
Bitcoin’s decline on Thursday alongside equities highlighted the continued high correlation it has shown with traditional financial markets since its November 2021 peak near $69,000. Some analysts argue this behavior undermines claims that BTC is a reliable inflation hedge or safe store of value.
Bank of America recently noted that Bitcoin may no longer be a “good” inflation hedge given its volatility and its movement in step with the S&P 500 and Nasdaq.
However, Gemini co-founder Cameron Winklevoss maintains that Bitcoin remains the best hedge against inflation, echoing views shared by parts of the crypto community and some mainstream investors.
Inflation hit 7.5% in January. Highest in four decades. It continues to accelerate.
The best way to shield yourself from this pernicious, silent tax on your life’s work — your blood, sweat, and tears — is bitcoin.
— Cameron Winklevoss (@cameron) February 10, 2022
At the time of writing, the BTC/USD pair was hovering around $44,900, roughly 2% higher over the past 24 hours. The cryptocurrency remains positive on the week, up about 22%.