U.S. Inflation strikes 7.9%, Bitcoin having unfavorable impacts

In February, U.S. Inflation saw a massive increase, with commodities and energy prices skyrocketing.

The Fed might have to focus on controlling inflation and might increase the interest rates and tighten the monetary policy.

On the other hand, it is to look forward to what the future holds for cryptocurrencies. Bitcoin has been swinging around $39,000 since the report by U.S. BLS.

The U.S. Inflation witnessed a peak in February. It was expected to see a peak in Q1 and remain elevated for the remaining part of the year, but the skyrocketing prices of commodities and energy prices indicate something different.

According to the U.S. Bureau of Labour Statistics report, the Consumer Price Index escalated 7.9% in the last twelve months, which was the fastest since 1982. And the CPI rose by 0.8% in February, which was faster than January, which accounted for 0.6%.

Controlling inflation seems to be the primary task of the Federal Reserve now, and this February CPI data further signifies it. The Fed might need to start raising the interest rates and tightening the monetary policy.

And since December, an increase in the ten-year yield with the credit getting more expensive has been fine-tuned with the fall in Bitcoin’s price.

The credit markets have realized that inflation is here for a long time. And as the credit instruments sell-off, the interest rates actually begin to rise. Resulting in a lower net present value for the financial assets, with a higher interest burden on the consumers, corporates, and sovereign balance sheets.

Bitcoin, the crowned cryptocurrency by market cap, is witnessing a consolidated price of around $39,000 following the report release.

According to a market analyst at Oanda Corporation, a foreign exchange company, Edward Moya, Bitcoin declined after both a sixth consecutive hot inflation report and hopes collapsed for an instant diplomatic resolution between Russia and Ukraine. And that Bitcoin remains locked into the risk trade and would continue to trade off incremental updates from Ukraine.

Russia’s anarchist approach towards Ukraine has sparked drastic changes worldwide. Concerns were recently raised about a potential wave of recession. The prices of commodities are the most sensitive area of any economy that gets hit first with any global crisis. Red flags have already started to show, with gasoline prices rising 6.6% in February. The report further talked about the prices of food, energy and other items.

Some products that have witnessed significant price rise are used vehicles, which are up over 41% compared to last year, whereas food is almost up by 8% and shelter costs have increased to 4.4% during the same time period.

Russia-Ukraine war has resulted in an increased adoption for trading in cryptocurrency as access to traditional finance systems became tough for the citizens. And these global crises and potential recession might result in increased adoption of the asset class, especially Bitcoin, due to its survival age and reliability. Folks may turn their heads toward Bitcoin in the upcoming future.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing