Bitcoin jumps toward $49K amid fears 5%-plus inflation is here to stay

Bitcoin (BTC), which gained ground on Sept. 18, was driven by the Federal Open Market Committee (FOMC), policy meeting. This is in response to lower inflation numbers from Tuesday.

On the Coinbase exchange, the BTC/USD exchange rate was at $49,000. It reached $48,825 before falling on interim profit-taking sentiment. The pairs move uphill raised hopes that it would reach $50,000 in the next sessions, which is a psychological resistance target.

#bitcoin must reach $50,000 in order to be able to hold it.
— David Gokhshtein (@davidgokhshtein) September 18, 2021

Inflation fears boost Bitcoin demand

Fears of persistently high inflation gave Bitcoin markets a boost despite the release of a softer consumer price index (CPI), on Sept. 13.

The data showed that the U.S. CPI increased 5.3% in August year-over-year, compared with 5.4% the month before. These numbers received mixed reactions from the market. Some praised core inflation for coming out lower than expected, while others pointed out that inflation was still extremely high — with 5.3% being the highest number in over a decade for CPI.

Jens Nordvig, founder of Exante Data, stated that he prefers to view inflation data in a median meaning (so instead of having one crazy category drive it), and that he looks at the distribution center across 82 categories equally weighted. He also added:

“[Inflation] was not low on [median] metric. JUST IN – The NY Federal Reserve sees inflation at 5.2% per year and 4% over three years. This is a high number with “large expected price increases” in food, rent and medical.
— September 13, 2021, (@disclosetv).

As TD Securities analysts pointed out that the Federal Reserve may delay its planned tapering of $120 billion monthly asset purchases after the weaker-than-expected inflation report, more bullish cues were given for Bitcoin.

Anthony Pompliano (Partner at Pomp Investments), warned that Americans would see their savings disappear if there is sustained 5% inflation.

Pomp wrote in a note to clients that “the only way to protect yourself from this environment is to ensure you are invested.”

The more you invest in markets, whether it be equities or real estate, the better off your financial situation will be.

Dollar rises in tandem

The BTC/USD exchange rate rose 4.85% the day after the inflation data were released.

On Wednesday, the pair rose by 2.17% and its prices closed above $48,000. The pairs prices began to consolidate sideways over the next two sessions and then moved further towards $49,000 Saturday.

Surprisingly the US dollar index (DXY), which measures the US dollar against a basket of top foreign currencies, also rose like Bitcoin. This indicates that macro investors moved capital to assets they considered safe-havens following the inflation report. The index measures the dollar against a basket top foreign currencies and surged by 0.41% to 93.246 on Friday, its highest level since September.

Mixed inflation outlook leads to Bitcoin and US dollar index increases. Source:

Next weeks FOMC meeting should bring more cues about Bitcoin and dollar markets.

Related: Bitcoin falls to $40K following the press conference of Jerome Powell

Officials at the Fed agree that they will begin to unwind their loose monetary policy by the end this year. The report on nonfarm payrolls (NFP), released earlier this month, showed that the U.S. labour market has not fully recovered.

This would cause the Fed to delay its tapering plans and could lead to Bitcoin strength or dollar weakness.

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