Bitcoin (BTC) Falls 5%, Breaching $20,000 as June Inflation Hits 8.8%

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The latest consumer price index shows that June inflation surged to a record high compared to June 2021, reaching the highest level since 1981.

Key points

• Higher inflation news for June is sending Bitcoin and the crypto sector south this morning. BTC was down more than 5%, breaking the key support barrier of $20,000 and the crypto market in general was down 3.2% at press time according to CoinMarketCap.
• Bloomberg is reporting that the June inflation rate reached a 40-year high of 8.8% compared to June 2021 and a 1.1% month-over-month increase from May 2022.
• Experts predict another 0.75% interest rate hike from the Federal Reserve later this month to try and quell inflation’s climb.

Bloomberg has reported that the consumer price index — which is more commonly called the inflation rate — increased 8.8% in June compared to June 2021, and represents a 1.1% month-over-month increase compared to May 2022. This latest jump is the largest in four decades and is weighing on both stock prices and digital asset valuations across cryptocurrency exchanges.

This morning, Yahoo! Finance showed that the equity markets were down about 1% at the time of writing while the cryptocurrency sector slid 3.2% — pushing the market valuation for the entire crypto space down to $885.34 billion, according to CoinMarketCap. The inflation news seems to be hitting Bitcoin harder causing it to drop more than 5% over the past 24 hours to as low as $19,609, but it has since retraced a bit. It remains lower than the key psychological threshold of $20,000, however.

Bitcoin struggles as inflation hedge

Bitcoin was originally created in 2008 as a peer-to-peer payment system to serve as an alternative to centralized fiat currencies, which Bitcoin programmers believe can be manipulated by questionable fiscal and monetary policies by government institutions. Over its more than 13 year history, Bitcoin has been repositioned as a store of value due to its capped supply of only 21 million coins, which has been heralded as a strong hedge against inflation.

However, that has not been the case as the price of Bitcoin and cryptos in general have actually mirrored the market movements of technology stocks ever since Bitcoin recorded its peak price of $68,789 price per coin set on Nov. 10, 2021. It has since declined 71% from that price peak while inflation has increased more than 5% every month for more than a year. That situation is unlikely to improve as economic experts and financial analysts predict another 0.75% interest rate hike from the Federal Reserve later this month to try and cool inflation.