Economist Alex Kruger has been following inflation data as he believes the next update will set the direction of the crypto markets.

Alex Kruger says inflation is now the Federal Reserve's number one concern. According to economists, the Fed has been hawking as it considers multiple rate hikes and reduced asset purchases this year to combat rising inflation.

alex kruger

Kruger emphasizes that if the Fed carries out its plans, the lack of liquidity in the system could negatively affect the crypto markets.

   "Crypto-assets are at the extreme end of the risk curve. Not only do they benefit from extraordinarily loose monetary policy, they also suffer from unexpectedly tight monetary policy as money slides into safer asset classes."

With Bitcoin (BTC) falling over 40% from its all-time high, Kruger says the latest consumer price index (CPI) data, a tool for measuring inflation, could identify the next phase of the crypto market cycle.

   "We're going to get US inflation data today… If CPI surprises down, wait for prices to burst and move for a while. If CPI surprises up, 'lights go out', BTC could drop to $30,000."

Kruger also said he believes the Fed is ready to see market dips just to keep inflation in check.

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Recovery Continues in Bitcoin

Bitcoin climbed above the $42,000 resistance zone yesterday after Powell's comments. The upward move gained momentum and the price settled above the $43,000 level. A local top was formed near $43,127 and it is now correcting gains. It traded below the $42,800 support level and there was a move below the 23.6% Fib retracement level of the upward move from the $41,315 high to $43,127 high.

Moreover, there is a key bullish trend line forming with support near $42,200 on the hourly chart of the BTC/USD pair. Bitcoin is currently trading above $42,000 and the 100 hourly simple moving average.