Bitcoin tumbles as inflation hits 40-year high of 8.6%

Bitcoin’s price sank following the latest US Consumer Price Index (CPI) release, which showed that the index had unexpectedly hit 8.6%, reaching its highest level in 40 years.

Despite economists’ expectation that the CPI figure to remain flat at 8.3%, the same as April, the Labor Department’s announcement on June 10 defied that inflation is under control.

Data from the US Bureau of Labor Statistics showed US consumer prices have surged since October 2021. A peak of 8.5% in March 2022 was followed by a 0.2% drop off the following month, leading to some analysts calling it a top for inflation.

Back in May, Ally Financial chief markets and money strategist Lindsey Bell told Forbes that “green shoots” in the data could point to inflation having topped out.

However, new data by the US Labor Department put May’s consumer price index at 8.6%, past the previous peak in March. It marks the highest level in 40 years, derailing any talk of inflation having topped.

BTC price reacted to the news with a 2% swing to the downside, bottoming at $29,470. The ensuing fightback from bulls peaked at $29,835 before bears took control to trigger a sunk below the initial local bottom to close at $29,400.

Meanwhile, highly correlated with the crypto market, the Nasdaq has fared better. It opened trading at 11,544, climbing 10 points to a peak of 11,554. Since then, a less than 1% drop hit a local bottom of 11,482 before moving into an uptrend.

According to FT, US Treasury Secretary Yellen said fighting inflation remains a top priority for the White House. Undoubtedly, the higher-than-expected CPI data puts more pressure on the Fed to action rate increases in the near future.

In May, Bitcoin tumbled to its lowest price since July 2021 as tighter monetary policy continues to impact risk-on assets. The Fed’s rate rise by 50 basis points at that time was its highest in 22 years. Further 50 bps hikes are expected in both June and July, with the possibility of a fourth move in September, according to the CME group’s FedWatch tool.

Currently, BTC’s price is down 50% from its all-time high in November, and on-chain analysis firm Glassnode noted in a recent report that this decline “remains modest when compared to the ultimate lows of prior Bitcoin bear markets.”