A leading crypto analytics firm says that a correlation exists between cryptocurrency prices and inflation levels.
Following the announcement that the inflation rate, or Consumer Price Index (CPI), rose by 8.5% in March, Santiment says that the crypto market enjoyed a boost as a result.
[adinserter block="1"]“When inflation and CPI data releases are major subjects of interest for the crypto community, price turnarounds generally occur. We’ve seen a decent crypto bounce today with consumer price data revealing a higher than expected 8.5% rise in March.”
The analytics firm says that the price of Bitcoin tends to reverse when the frequency of the appearance of keywords “inflation and “CPI” on social media platforms increases.
“If we look at ‘Inflation’ and ‘CPI’ mentions, we can see that the market just turns around when these topics spike.”
As an example, Santiment says that a crypto bottom occurred in mid-March after the Federal Open Market Committee noted that inflation remained “elevated.” According to the analytics firm, it remains to be seen whether the uptick resulting from the CPI rising 8.5% in March will mark another bottom for Bitcoin.
The analytics firm also says that the surge in the frequency of appearance of the keywords “inflation” and “CPI” on social media platforms does not guarantee a price reversal.
“Super high social volumes are often a foreshadow of a price reversal.
Note that these spikes don’t necessarily always imply that there is a definitive top or bottom forming.
But it does mean that each time the crypto crowd rationalizes an event, it’s as if they are proclaiming as a group ‘Ok, now we know why it’s happening.’ And then the opposite price reaction generally occurs after this crowd consensus.”
Follow us on X, Facebook and TelegramDon't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any assets including cryptocurrencies, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/vectortatu/Natalia Siiatovskaia
