The crypto market is retesting critical support areas as the U.S. Consumer Price Index (CPI) print surpasses expectations. The metric is used to measure inflation in the U.S. dollar, and it recorded an 8.6% increase year-over-year (YoY), the highest since 1981.
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This could turn the U.S. Federal Reserve (FED) more aggressive in its attempts to stop inflation. The financial institution began tightening its monetary policy which has translated into a reduction in global liquidity, and negative performance for risk-on assets, such as Bitcoin.
The price of Bitcoin is back at $29,400 with a 3% and 3.5% loss in the last 24-hours and 7-days, respectively. The cryptocurrency made several attempts at returning to previous highs, but market conditions have contributed to an increase in selling pressure.
A pseudonym trader presented two potential scenarios for Bitcoin in the coming months. The trader claims the market seems to have two targets in mind for the price of the number one crypto: either more downside to $20,000 or a push upwards to $40,000.
As seen below, this trader believes Bitcoin could drop to $25,000 before returning to its current levels. This scenario contemplates Bitcoin forming a new range between its yearly lows and the low $30,000.
The number one cryptocurrency, and the crypto market cap, might seem some relief later this year. However, rising inflation with a hawkish FED cast a long shadow over the bulls.
The second scenario contemplates a longer BTC price range, but with less volatility. The trader said the following about these potential scenarios:
These scenario’s would make for a painful and slow crab market throughout the summer. The space would end up feeling dead and empty. Right in time for some positive changes in terms of the macro landscape later on which could be the bullish catalyst for a breakout.
Can Bitcoin And Crypto See New Highs In 2022?
As inflation in the U.S. seems to spiral out of control, the U.S FED will continue to tighten by reducing their balance sheets and increasing interest rates.
Consequently, the crypto market could experience steeper losses. Over the past months, as macro-economic uncertainty rises, Bitcoin dominance followed with an upward trend.
As NewsBTC reported, this metric stood north of 40% in the past 7-days but could return to its 2020 levels. At the time, Bitcoin alone formed above 60% of the total crypto market capitalization.
If the economic narrative turns its attention from reducing inflation to stopping a potential global recession, Bitcoin and the crypto market could see some relief. This scenario seems likely to play out by the end of the year.
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In any case, new highs seem unlikely for the crypto market. However, market participants should keep an eye out for a shift in narratives as they could signal potential bullish momentum.