• Inflation is slowly decreasing in the US and UK after reaching its highest levels in decades.
• Bitcoin has been rising as a result of this decrease, outperforming the S&P 500 on five out of six CPI days.
• Analysts believe that decreasing inflation will lead to an easing of tight liquidity conditions, which has historically been good for bitcoin.
Inflation Sliding
Inflation hit some of its highest levels seen in 40-50 years in the US and UK due to weak leadership and financial tactics such as rate hikes. The consumer price index report shows that inflation is now just under 5%, slightly lower than what was expected.
Bitcoin Reacts Positively
Analysts at e-Toro commented that Bitcoin’s gains are a reaction to inflation coming down as intended by the Federal Reserve. Steven Lubka from Swan Bitcoin further noted that decreasing inflation would lead to an easing of tight liquidity conditions, something beneficial for crypto assets like BTC.
The Crypto Winter
Throughout 2022, high inflation rates caused great suffering for crypto markets; BTC lost more than 70% of its value during this time period falling from $68,000 to $16,600. This was largely because of rate hikes implemented by the Federal Reserve in order to combat inflationary pressures.
Easing Fears About Economy’s Future
The slight decrease in inflation is leading many analysts and economists to be optimistic about the future prospects for cryptocurrency prices and other economic indicators such as unemployment rates and housing prices. As Callie Cox said “Lower inflation also supports the case for the end of rate hikes, and higher rates are what started the crypto winter over a year ago” meaning if things continue this way then it could spell good news for cryptocurrencies going forward.
Conclusion
As it stands now, Bitcoin appears to be reacting positively to decreased levels of inflation across both countries; however only time will tell how sustainable these gains are or if they come with their own set of risks associated with them moving forward
