Bitcoin’s volatility rises because of US inflation

The correlation between the price of Bitcoin and the state of the US economy became very clear in the past 48 hours. After the US inflation rate turned out a bit higher than expected, the price of the largest digital currency suddenly fell 3.6% to $59,000.

Bitcoin quickly recovered and the support around $60,000 remained intact (this is the point to which Bitcoin always returns). On Friday, Bitcoin even went up 4%.

At the time of writing, the largest digital coin is trading for $62,800.

This year, Bitcoin’s average volatility, which is normally very high, has fallen from its historical levels. Since Bitcoin hit a record in March, the largest digital currency has been trapped in a trading range. It is a hopeful sign to notice that Bitcoin has no longer fallen below the $50,000 mark, which is psychologically very important.

Trading range

The newest US inflation figures were not that bad, but because they came in about 0.2% higher than the figure analysts had hoped for, the possibility that Federal Reserve Chairman Jay Powell will soon cut long-term interest rates by 50 basis points again is lowered. Analysts now think that we will only decline by 25 basis points in November.

This has a direct impact on the risk analysis that various investment and pension funds make. If interest rates remain high, there will be less room for risky investments such as tech stocks and Bitcoin. If interest rates drop faster, pension funds will be able to invest their money in crypto and Bitcoin ETFs more easily.

Bitcoin thus remains stuck in the trading range between $55,000 and $65,000 for another week. Investors were hoping for an ‘uptober’ this month, but so far they have not gotten their money’s worth. The result for the month of October is -1%. Of course, we are not yet halfway through the month.