Buyers failed to sustain a brief recovery in BTC

Bitcoin (BTC) recovered from a nearly 5% drop on 10 February after the January U.S. inflation report showed a 7.5% increase in prices.

Inflation has been increasing recently, the fastest in over 30 years. Some economists predict that the U.S. Federal Reserve may need to raise interest rates next month to control inflation which will hopefully help it gradually decrease over time if they choose to make a change.

Stocks fell on Thursday, which caused the S& P 500 to fall by roughly 2%. Meanwhile, Treasury bonds have risen to 2%.

Bitcoin has traditionally been a good hedge against risk for cryptocurrency investors. So, as the market saw a significant downturn recently, bitcoin outperformed other cryptocurrency investments such as altcoins. Bitcoin’s price is still relatively stable and hasn’t fallen too much during this market fluctuation.

Latest prices

• Bitcoin (BTC): $44122, −1.25%
• Ether (ETH): $3114, −4.36%
• S&P 500 daily close: $4504, −1.81%
• Gold: $1828 per troy ounce, −0.40%
• Ten-year Treasury yield daily close: 2.03%

There are mixed opinions about the future of the market. Some analysts believe that selling pressure will eventually die down. Others expect economic growth to slow and monetary policy to tighten, which would keep buyers on the sidelines for now.

“The simple explanation from our end is that there is major trading volume around economic data releases,” Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, wrote in a Thursday brief. “It’s possible that the carnage we witnessed the past several weeks already priced in a 50 basis point rate hike.”

Bitcoin course to the Dow Jones Industrial Average was immediately reversed following the January U.S. inflation report, which showed a 7.5% increase in prices, the highest level recorded over the last four decades.

The inflation rate is high. It’s faster than economists predicted, which means the problem will worsen before it gets better. The U.S. Federal Reserve Bank is expected to raise interest rates soon, which could help contain this problem in time. Higher interest rates and tighter monetary policy might also lead to lower stock prices and more expensive for investors to borrow money for other projects. The increased volatility we see lately is a clear sign of that.

Some analysts predict that the pressure on prices will ease up, while others think that lower economic growth and tighter monetary policy will keep buyers away.

“The simple explanation from our end is that there is major trading volume around economic data releases,” Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, wrote in a Thursday brief. “It’s possible that the carnage we witnessed the past several weeks already priced in a 50 basis point rate hike.”

Fundstrat has advised clients to buy on dips during the first half of this year despite the volatile price action. It remains optimistic about crypto despite macroeconomic uncertainty.

MRB Partners, an investment strategy firm, wrote, “will struggle to digest the less accommodative shift in global monetary policy over the next six to 12 months.”

“There is further upside for government bond yields in the next year, although a pause likely looms in the near term,” MRB wrote.