After a double-digit price decline last week, Bitcoin’s immediate uptrend has slowed (BTC / USD) and its outlook depends on the release of the US inflation report. This will happen on September 14th. Leading crypto by market cap was down 11% last week. That was the biggest drop in a single week since May, reports Coindesk.
Given that the price structure of Bitcoin is now similar to that after the big slump in April, experts fear an even steeper decline. If the US consumer price index is above 5% a year for August, there could be a prolonged sell-off. This could accelerate the Fed’s plans to reduce bond purchases to increase liquidity.
Interest rate concerns caused the last major price decline
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In mid-May, Bitcoin’s value fell $ 28,000 after the CPI hit a 3-year high. Concerns about the negative impact of mining on the environment and China’s crackdown on mining further exacerbated the situation. QCP Capital commented:
As usual, inflation remains key – especially as base effects end and CPI numbers start to reflect the Fed’s true picture for the year. The worst of the base effects are arguably over now. If inflation is still above 5% as of now, watchers will certainly be concerned.
It’s already starting. Some Fed members agreed to start adjusting as early as this year. However, observers fear that a possible adjustment could lead to a decline in dollar liquidity in the fourth quarter. After the debt ceiling is lifted, the Treasury Department could start issuing more bonds to replenish its TGA, which would coincide with a loss of liquidity. The government could also hit the debt ceiling in the final quarter of the year because it is out of money. Nordea Bank analysts said:
The Treasury Department is likely to replenish its cash position quickly after a debt ceiling suspension, as the TGA’s new “equilibrium level” is likely to be around $ 800 billion. This translates into a net cash drain of nearly $ 600 billion compared to the current scenario, which isn’t exactly good news for risk taking.
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