Bitcoin’s value dropped by 4.1% on November 14 following US inflation data that exceeded market expectations. The decline mirrored the S&P 500 index futures, which fell from 6,023 to 5,980 over four hours.
The October US Producer Price Index (PPI) showed a 2.4% annual increase, slightly above consensus. However, this has not altered the outlook for a potential interest rate cut by the Federal Open Market Committee (FOMC) in December.
Historically, Bitcoin has benefited from inflation concerns. But recent government-led liquidity injections have dampened these effects. With the labor market strong but traders cautious about corporate earnings pressures, traders are reevaluating Bitcoin’s role as an inflation hedge.
Recent government actions, such as proposed cost-cutting measures and tax credit eliminations, could impact risk assets like Bitcoin. The appointment of new officials to streamline bureaucracy may result in job losses and reduced investment funds, affecting the stock market and other sectors, including housing and commodities.
Bitcoin is often seen as a reserve asset, offering protection against currency devaluation. However, its scarcity value and censorship-resistance features are likely to maintain demand even without direct competition with the US dollar.
Despite short-term investor concerns over inflation, Bitcoin’s long-term trajectory may withstand these pressures. A potential interest rate cut by the FOMC in December could provide support for Bitcoin’s value.
Source: https://cointelegraph.com/news/bitcoin-corrects-as-us-inflation-data-emerges-is-the-rally-to-100k-at-stake