Expert warns that high inflation could push Bitcoin price to $ 30,000

Alex Krüger, founder of Aike Capital, a New York-based asset management company, warned on Wednesday (Jan. 12) that Bitcoin could fall as low as $ 30,000 if U.S. inflation data is released.

The market expects the consumer price index (CPI) to rise 7.1% for the full year through December and 0.4% month on month.

US inflation | Source: Bureau of Labor Statistics

Continue to support normalization of the labor market, including rising incomes and falling unemployment, according to data released Jan. 7.

“Cryptoassets are at the very end of the risk curve,” wrote Krüger tweets on Sept. 1, adding that, having benefited from the Fed’s “extremely loose monetary policy”, they would be surprised by tighter monetary policy and allow money to flow into other currencies.

“Bitcoin is now a macro asset that is trading as a proxy for liquidity conditions. With liquidity plummeting, macro investors are now selling Bitcoin and the entire market will follow. “

First rate hike in March 2022?

The Fed has been buying $ 80 billion worth of government bonds and $ 40 billion worth of mortgage-backed securities every month since March 2020.

BTC / USD Price Chart vs. Fed Balance Sheet | Source: TradingView

The collateral damage from expansionary monetary policy, however, was higher inflation, which reached 6.8% in November 2021, its highest level in nearly four decades.

As a result, the Fed changed its stance from expecting no rate hikes in 2022 to discussing three rate hikes along with a balance sheet normalization, despite previously saying that consumer prices were “temporarily” higher.

Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, told CNBC:

“More tragic than expected and the change in the Fed’s restrictive tone came as a surprise.

Most market participants expect higher interest rates and a less expansionary monetary policy, but if you look at the funds on offer, the implied chance of a rise in March is 90%, on New Year’s Eve it is only 63%.

Mini bear market?

Mike McGlone, chief commodities strategist at Bloomberg Intelligence, has identified $ 40,000 as an important level of support in the Bitcoin market. Additionally, he predicts that bitcoin will eventually get out of the bear cycle when the world goes digital and treat it as security.

BTC / USD daily frame price chart with USD 40,000 support in story | Source: TradingView

The statement came as Bitcoin fell 40% from its November 10th all-time high (ATH) of $ 69,000. According to Eric Ervin, Managing Director at Blockforce Capital, that decline has caused many short-term investors to flee and leave the market with long-term investors.

It could be the start of a “mini bear market,” said Ervin, adding that such corrections are “perfectly normal” for seasoned crypto investors.

Kruger also noted that Bitcoin has fallen so far from ATH that it is currently technically oversold.

So if the CPI is unexpectedly in a downtrend, markets can expect Bitcoin price to rally and trend for a while.

“US inflation data will be available on Wednesday. Think the price will hover between $ 41,000 and $ 44,000 by then, “added Kruger.

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