Crypto Market Volatility to Continue As US CPI and Inflation Jumps

The latest report from the Labor Department on Tuesday revealed a 0.1% increase in the US CPI for November, with a year-over-year rise of 3.1%. This figure differed from the expectations of economists surveyed by Dow Jones, who anticipated no change and a yearly rate of 3.1%.

Although the monthly rate indicated an uptick from October’s flat US CPI reading, the annual rate demonstrated a slight decline, down from the 3.2% recorded in the previous month.

US CPI Jump Can Induce Crypto Market Volatility

In the latest data release, on-chain data provider Santiment highlights this development is more likely to introduce volatility in crypto prices in the short term. Interestingly, Santiment notes that mentions of a bear market are high, and historically, fear, uncertainty, and doubt (FUD) often precede market rebounds.

As of press time, the Bitcoin (BTC) price is trading 2.1% down slipping back under $41,000 levels. The selling pressure is quite visible and we can also see a pullback down under $40,000.

In the current landscape of heightened market volatility, on-chain data from Santiment reveals a noteworthy trend. Bitcoin is exhibiting a mild return to exchanges, reflecting trader uncertainty. Conversely, the increased presence of Tether ($USDT) on exchanges, up by 6.9% compared to six months ago, serves as a positive indicator for bullish sentiment in the market.

In the face of potential further correction, prominent crypto market analyst Ali Martinez identifies a robust support zone for Bitcoin between $37,150 and $38,360. This support is substantiated by the involvement of 1.52 million addresses collectively holding 534,000 $BTC. Additionally, Martinez advises vigilance regarding two resistance walls hindering the BTC uptrend, positioned at $43,850 and $46,400.

Notably, following the recent dip in Bitcoin prices, there has been a noticeable surge in the number of entities holding 1,000 $BTC or more. This upward trend indicates that significant BTC whales are capitalizing on the price drop, strategically accumulating more of the cryptocurrency.

All eyes on the Fed

Having raised rates 11 times since March 2022 amid high US CPI and inflation data, policymakers are anticipated to convey that the current phase of policy tightening has concluded. This will further pave the way for potential cuts at an as-yet-undetermined rate. Post-announcement, futures pricing maintains an outlook suggesting minimal prospects of further rate hikes, with the initial cut anticipated around May.

Futures markets strongly indicate an aggressive easing stance by the Fed in 2024, projecting potential rate cuts of up to 1.25 percentage points by year-end. However, respondents to the CNBC Fed Survey express a more measured perspective, envisioning the central bank opting for a gradual approach with around three cuts, each in quarter-percentage point increments.