Could Lower Than Expected US Inflation Be The Cause Of Bitcoin’s Price Dip?

  • In the last week, the price of Bitcoin has oscillated between $61,000 and $53,000, generating uncertainty as fund inflow falls.
  • Cryptocurrency fund inflows declined by an incredible 58% in the wake of massive investments by corporations, Wall Street, and retail traders.
  • The Atlanta Federal Reserve’s president, Raphael Bostic, has noted that stimulus and fiscal interventions may make inflation hard to predict in the coming months.
  • The dip follows reports of more Bitcoins being moved from exchanges to cold wallets.

Within the last 7 days, Bitcoin has seen highs of about $61,000 and also reached lows of $53,000 in what has been a chaotic week for the world’s largest cryptocurrency. Currently, Bitcoin trades at $55,904.

Analysts have suggested that lower inflation may be responsible for the latest dip in prices. Raphael Bostic, president of the Atlanta Federal Reserve, has attributed the difficulty in predicting inflation rates to the inflow of stimulus funds and fiscal interventions through the country.

Crypto Funds Faces Major Slump

The inflow of cryptocurrency funds faced a major setback in the last week as they fell by 58%, a drop that may account for the price dip faced by leading cryptos.

The value of cryptocurrency fund inflow is a far cry from the previous highs seen in February, when both retail and institutional investors were splurging funds to accumulate digital assets.

Right now, the amount of inflow sits at a lowly $99 million in the last week; a report by CoinShares observed that there has “been a steady decline of appetite amongst investors.”

In addition to the dwindling inflow of funds, there has also been a steep decline in Bitcoin investment trading volumes, which could account for the dip in price.

It appears that there is a dichotomy in fund inflow based on regions. While it is declining rapidly in the US, Europe and Canada have managed to sustain investor appetite, with Canada recently approving the creation of multiple Bitcoin ETFs to attract fund inflow.

On the Flipside

  • Investors may have seized the opportunity of Bitcoin’s price drop to buy more of the cryptocurrency, predicting a future rise in the asset’s price.
  • One such enthusiast is Jordan Belfort, popularly known as “the Wolf of Wall Street,” who has predicted that Bitcoin will reach $100K.
  • Deutsche Bank reports that Bitcoin is now the third-largest currency in circulation and is too big to be ignored.

Inflation Signals Difficult To Predict

The president of the Atlanta Federal Reserve, Raphael Bostic, noted in a Clark Atlanta University podcast that the volume of fiscal and monetary stimulus in the economy could obfuscate the signals of inflation in the coming days.

He explained that these “stimulus funds are not forever funds, and when they flow through the economy, we will be in a better place to get a true signal.”

In addition to slumping prices, many Bitcoins have been moved off exchanges due to rising awareness of cold storages, miners reducing the rates of sales, and Bitcoin being held in escrow by borrowing and lending platforms.

Analysts have speculated that falling prices are also tied to the closing of over-leveraged long liquidations valued at $738 million.

While hardcore believers in Bitcoin see it as the best hedge against inflation, recent events and the cryptocurrency’s lack of history have cast a shadow of doubt on its credentials as a viable hedge.

The reason for the belief in Bitcoin stems from the limited nature of its supply and its decentralization, which makes it impossible for a central bank to devalue it.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss


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