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Bitcoin slid alongside stocks after U.S. inflation unexpectedly rose to 7.5% year-over-year
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After dipping below $44k, BTC rebounded toward $45,000 as analysts outlined potential moves for the flagship crypto
Bitcoin pushed through a key resistance level and traded as high as $45,201 overnight on Wednesday before pulling back as broader markets declined at the start of U.S. trading. The retreat followed a spike in U.S. inflation data that surprised investors.
Analysts weigh in on Bitcoin’s outlook
The selling pressure that had appeared earlier intensified after U.S. inflation data showed a 7.5% year-over-year rise versus expectations of 7.3%. Risk assets such as cryptocurrencies and equities reacted negatively as attention turned to the possibility of Federal Reserve rate hikes, potentially beginning in March.
The S&P 500 fell 0.23% and the Nasdaq Composite dropped 0.18%, while the Dow Jones Industrial Average remained essentially flat.
Trader and crypto analyst Michael van de Poppe noted:
“The U.S. Consumer Price Index (CPI) came in at 7.5% year-over-year versus expectations of 7.3% year-over-year. The DXY is rising and risk assets like Bitcoin and equities are down. The likelihood of the FED raising rates in March has increased.”
Crypto trader Cantering Clark said Bitcoin’s pullback from the intraday high put the price back into a defined range. He suggested the market could resume an upward trend if stock indices stabilize and BTC holds key support. For him the crucial level is $43,000.
Another analyst, Rekt Capital, argued that the recent rally may not be over based on the Fear & Greed investor sentiment gauge, which he described as “neutral” toward Bitcoin.
“Greed typically precedes local tops, so looking at sentiment alone this BTC rally may not be near its end. 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.
If Bitcoin rebounds from today’s dip and clears the EMA and the $45,000 area, analyst Ali Martinez said the next major resistance would be around $48,000. Beyond that, $50,000 would carry important psychological significance.
Bitcoin’s role as an inflation hedge
Thursday’s decline, which mirrored movements in equities, highlighted Bitcoin’s continued correlation with traditional financial markets since the $69,000 peak in November 2021. Some analysts argue this suggests BTC is no longer a reliable inflation hedge or a superior store of value.
Bank of America recently suggested Bitcoin may no longer serve as an effective inflation hedge due to its volatility and observed trading correlation with the S&P 500 and Nasdaq.
Conversely, Gemini co-founder Cameron Winklevoss maintains that Bitcoin remains the best hedge against inflation, a view echoed by many within the crypto community and some institutional investors.
“Inflation hit 7.5% in January, the 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,” he wrote.
At the time of writing, BTC/USD traded around $44,900, up roughly 2% over the past 24 hours. The cryptocurrency remains significantly higher on the week, gaining about 22%.