The bitcoin price is crashing at the start of the US session after US Consumer Price Index inflation came in at the top of economists' forecasts.
Bitcoin is trading down 4.1% at $21,404 after a good run in which still leaves the price up 13% over the past seven days.
As we reported earlier today, crypto traders were awaiting the inflation data before making their next moves.
After remaining unchanged in July, the US data for August saw prices increase 1% on a monthly view, dashing hopes that the rate might be stabilising before starting to turn lower.
Bitcoin was once touted as a hedge against inflation in the belief that its fixed supply would be looked upon favorably by investors looking to preserve their wealth from erosion by a general increase in prices.
Unfortunately, missing from that analysis was an appreciation of how bitcoin and crypto have come to be treated as high risk stocks, with valuations moving in sync with tech stocks.
Higher-risk tech stocks are usually valued on the basis of future earnings – higher interest rates eat into those earning projections.
The correlation between tech stocks and crypto is kept in place by the fact that it is tech investors – usually of a younger demographic - that are most likely to also hold crypto.
When investors are looking to rebalance their portfolios by jettisoning riskier assets, tech stocks and crypto will be at the top of the list.
Returning to the latest inflation data, while the annual rate is slightly lower from July, at 8.3% now compared to 8.5 previously, that has done nothing to dampen the expectation that the U.S. Federal Reserve will continue with its aggressive interest rate hikes to curb inflationary pressures across the economy.
The fall in crude oil prices in
Read more on cryptonews.com