Bitcoin price forecast in times of rising inflation

Bitcoin price has been falling for the past four days in a row.

US consumer price index has risen to its highest level since 1981.

Bitcoin price plummeted for the fourth straight day after new US consumer inflation data was released. The BTC/USD pair fell below $30,000 again. Right now, BTC is trading around $29,100, which was last seen in late May. Since peaking in November of last year, the coin is down almost 60%.

Rising consumer inflation in the US

Many Bitcoin proponents argue that it is a good hedge against inflation. However, in recent months, Bitcoin has failed this test as inflation has soared in the US and the rest of the world.

Data released by the Bureau of Labor Statistics shows that US headline consumer inflation has risen to its highest level since December 1981. More specifically, it rose from 8.3% in April to 8.6% in May this year. This increase was higher than the median estimate of 8.1%.

A closer look reveals that the prices of most goods have skyrocketed. Gasoline prices have soared near an all-time high of $5 a gallon. Meat prices rose 12% in May, while eggs, fish, milk and coffee rose 32%, 12%, 15.9% and 15.3%, respectively.

Analysts assume that the current rate of inflation will continue in the coming months, partly because there is no end in sight to the war in Ukraine. This war has disrupted energy and food markets, and fertilizer costs have risen to record highs.

There are two main reasons Bitcoin has failed in its role as an inflation hedge. First, the US Federal Reserve has reacted to the current situation with several interest rate hikes and initiated quantitative tightening. Historically, risky assets have tended to underperform during a period of high interest rates.

Second, inflation has resulted in a less dynamic crypto market. Instead of spending money on bitcoin, most people these days try to save and cover their basic needs.

Bitcoin Price Prediction

The daily chart shows that the BTC price has been in a downtrend for several months. He has been in a tight range since May this year and fails to recover. Right now, the price is below the 25-day and 50-day moving average lines, while the MACD is rising.

Since a bearish flag pattern has formed, Bitcoin is likely to see a downside breakout. If so, the price could drop even more drastically in the coming weeks. If so, the next key level is $25,604. A break above the $31,000 resistance level would invalidate the bearish view.