US Inflation Jumps Most in 40 Years, Bitcoin, Ethereum Gain

US Inflation Jumps Most in 40 Years, Bitcoin, Ethereum Gain

In December, monthly inflation in the US was a bit higher than expected, reaching 0.5%, while the annual inflation increased to 7% and was the same as expected.

Economists expected that the consumer price index (CPI), a key measure of consumer prices released by the US Labor Department, will show that inflation jumped by 0.4% in December and 7% year-over-year the highest increase in prices since 1982.

Bitcoin (BTC) moved up after the numbers were released, jumping from USD 43,400 to USD 43,900 in several minutes, and increasing its daily gains to around 5%. Ethereum (ETH) also moved up, surpassing USD 3,375 and increasing daily gains to 8%.

The annual inflation rate in the US:


While economists disagree on when inflation will peak, its well past the initial time frame the Federal Reserve (Fed) had expected to see.

Youve got the Fed in panic instead of patient mode, so the risk is overshooting... Were now in a position of the Fed chasing instead of anticipating. Its worrisome, Diane Swonk, Chief Economist at Grant Thornton, told CNBC.

According to Marcus Sotiriou, an analyst at the UKUK-based based digital asset broker GlobalBlock, there may be a selloff in the crypto market if the inflation numbers are larger than expected. This, however, shouldnt be a long event, as I suspect the market has already priced in the worst-case scenario due to the persistent selling recently, he wrote in an emailed note before the CPI numbers were released.

Sotiriou argued that the on-chain data is generally bullish, and that it suggests that these prices could be a buying opportunity, adding:

Bitcoin has entered the buy zone for dormancy flow, which has only flashed 5 times in Bitcoins history, which all lead to incredible rallies. This indicator compares Bitcoins market cap to the annual value of destruction in laymans terms it compares price to spending behavior. As the percentage of people spending their bitcoin is so low. It shows the sentiment of investors, unwilling to sell their bitcoin at this price.

As reported, yesterday, Federal Reserve Chairman Jerome Powell said during his confirmation hearing that we probably remain in an era of very low interest rates.

Should he be given another term, argues the founder and CEO of Quantum Economics Mati Greenspan, Powell will retain his position as the key figure at the helm of the great money printer. Rather than the statements, it is his boring presence on the stage and his familiar monotonous message of the economy being able to handle the COVID 19s Omicron variant while gradually reducing quantitative easing and preparing to eventually raise interest rates that helped alleviate investors concerns and put them at ease.

Its also important to keep in mind that the markets have declined a lot lately, so they are more than due for an upside correction, Greenspan wrote.

Meanwhile, in China, the inflation came in lower than expected. Chinas annual inflation rate fell to 1.5% in December 2021 from a 15-month high of 2.3% a month earlier. The latest reading was less than the market consensus of 1.8%, per Trading Economics data. Reuters noted that, in the case of this country, the slower-than-expected December producer inflation made room for more monetary easing.

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