After the publication of data on the consumer price index (CPI), Bitcoin, Ethereum, and the market as a whole continued to move upward.
Cryptocurrency market capitalization has returned above $2 trillion. The two leading cryptocurrencies, BTC and ETH, gained more than 3% and 4%, respectively. This happened despite the continuing rise in inflation in the United States, which was confirmed by the growth of the consumer price index to 7% YoY. Experts differ in saying about the impact of the American economy indicators on cryptomarket. Some of them note that the cryptocurrency market correlates with the stock market. This happened after capitalization increased to $2 trillion and higher.
Indeed, bitcoin, Ethereum, and other large-cap altcoins have begun to react to the US economic situation in the same way as the fiat stock market. In August-September, the head of the Fed, Jerome Powell said that he saw no danger in the fact that inflation in the United States rose. He hoped that this process would stabilize by itself. But investors felt differently. Both the stock market and the cryptocurrency market went up.
From September to November, the S&P 500 rose from 4280 to 4700. At the same time, bitcoin soared from $41K to an all-time high of $68.8K. Finally, the Fed has agreed that inflation is a threat to the economy and action must be taken to bring it down. And the markets went down on the news about the QE tapering and the increase in the key rate.
However, investors and traders differ now over their attitudes towards cryptocurrency assets. Some of them consider bitcoin and some altcoins to be protective assets, a hedge against inflation. Therefore, on the news about the growth of inflation, they increase their investments in crypto. Bitcoin prices and leading coins are rising.
But there are other market players, mostly institutional investors. They see digital currencies as risky assets. Therefore, they leave them as soon as the regulator announces specific measures to combat inflation. These measures will strengthen the dollar and dollar-denominated assets, cautious investors are shifting into them and leaving cryptocurrencies. Cryptocurrency prices are dropping.
As a result, horizontal dynamics may prevail in the cryptocurrency market. It is difficult to assess whose influence is greater. It is highly likely that the balance has been struck: the influence of bitcoin supporters is about the same as the influence of those who consider BTC to be a risky asset. In fact, it turns out that inflation in the United States is no longer affecting the quotes of leading cryptocurrencies. However, the number of cryptocurrency supporters is growing with time. This promises a transition from the flat to rally in the long term or even in the medium term.