Better-than-expected U.S. inflation news, cryptocurrency prices rise

The consumer price index rose 7%, but many investors expected even bigger gains; bitcoin and ethereum prices posted solid gains during the U.S. session.

Most of the leading altcoins also rallied. On a technical level, the BTC sell-off appears to be coming to an end as buyers attempt to reverse the short-term downtrend.

market trend

Better-than-expected U.S. inflation news, cryptocurrency prices rise

Bitcoin (BTC) rose to its highest price in a week, recovering after a poor start to last week.

At press time, the number one cryptocurrency by market cap is currently trading around $43,900, having dipped below $40,000 a few days ago for the first time since September. Bitcoin is still down 5.2% so far in 2022.

The bitcoin market may have been boosted by a report from the U.S. Labor Department on Wednesday that showed that the consumer price index, a key inflation gauge, rose to an annual rate of 7 percent in December, the fastest rate since the early 1980s. highest value since.

But there have been concerns in the market that prices could climb faster, putting additional pressure on the Fed to be more aggressive in tightening monetary policy and cooling the economy.

Bitcoin is increasingly seen by investors as a hedge against rapid inflation, since the Federal Reserve began printing money — more than $4 trillion so far — and pursued ultra-loose monetary policy in the wake of the coronavirus hit in March 2020. Prices have been climbing, throwing markets and the economy into disarray.

"The market's reaction to this new data may be a little confusing as we see the cryptocurrency market on a winning journey," Mati Greenspan, founder of cryptocurrency and foreign exchange analysis firm Quantum Economics, wrote in his newsletter on Wednesday. "This time around, though, investors seem to be a lot more relaxed about the Fed."

U.S. stocks closed higher, Reuters reported, also as concerns eased that the Federal Reserve could become more aggressive in tackling inflation.

In cryptocurrencies outside bitcoin, Near Protocol's NEAR token rose to an all-time high on Wednesday amid signs that the nascent blockchain may be undervalued as it attracts more activity.

Some analysts have warned that NEAR may look frothy on some metrics, and that bullish bets on FTM, another popular blockchain token, Fantom, have become a "crowded" trade.

Ether (ETH), the native cryptocurrency of the ethereum blockchain and the second-largest cryptocurrency by market capitalization, rose 4.2% over the past 24 hours to about $3,370, according to CoinDesk pricing.

Technical summary

Better-than-expected U.S. inflation news, cryptocurrency prices rise

Bitcoin buyers held support near $40,000 as an oversold signal appeared on the chart.

The recent rally shows that the cryptocurrency is starting to recover after falling nearly 30% from an all-time high of around $69,000 in November.

The Relative Strength Index (RSI) on the four-hour chart is approaching overbought levels, similar to what happened in late December, before a brief pullback. However, the RSI on the daily chart continues to rise from oversold levels, which means that buyers are likely to remain active as prices fall.

However, given the short-term downtrend, upside towards the $45,000-48,000 resistance zone appears limited. Momentum signals remain negative on the weekly and monthly charts, which means that price gains may be limited for now.