Bitcoin has fallen below $19,000 as the US inflation rate hit a 40-year high. This is one of the main data points that analysts, people, economists and the government (including the FED) are looking at. Indeed, this record inflation rate comes at a moment in which the Federal Reserve of the United States has raised interest rates aggressively over the last few months. 

Bitcoin Falls Below $19k As Inflation Rates Skyrocket

The inflation rate in the United States continues to move higher as the Federal Reserve seems not to be able to contain price increases. The CPI increased by 0.4% in just a month. This represents an 8.2% increase compared to the same month last year. These numbers were much higher than expected by analysts and the FED, therefore, there could be more rate hikes in the future. 

It is worth taking into consideration that food and rent prices went higher faster than normal, which has a stronger effect among individuals with lower incomes. Moreover, this inflation rate comes at a moment in which gas prices have slightly fallen, meaning that this rate could continue to move higher in the future if gas prices spike once again. 

This is a concerning situation for the FED and other central banks around the world, which might have to increase interest rates even higher in the future. Let’s not forget that there has been a large credit expansion for homes and cars, which is pushing monthly payments for households even higher. Hence, households are now facing higher mortgage rates and higher food prices, which is affecting consumption. 

At the same time, this is creating a very difficult situation for other central banks such as the European Central Bank (ECB) which have not been raising interest rates as much as the FED. The inflation rate in the Eurozone has surpassed 10% and some countries have already inflation rates above 20%. 

With the current debt levels in the Eurozone and inflation rates moving higher all around the world, there could be a very negative financial situation in the EU in the coming months. This is without taking into consideration the winter period that is getting closer and energy prices could move higher once again. Additionally, there is a geopolitical risk with the current war in Ukraine. 

In this situation, Bitcoin has fallen below $19,000 for the first time since September 22nd. BTC hit $18,200 on the Binance exchange for a short period of time before surging once again to $18,900. Some analysts consider that Bitcoin could continue to fall in the future if interest rates continue to move higher. 

With higher inflation rates, the FED and other central banks could take action in order to stop price increases. If that happens, risk assets such as stocks and virtual currencies, including Bitcoin, will be hurt the most. It is just a matter of time to see what the U.S. FED and other large central banks will do in order to stop inflation at a moment in which people were talking about “pivoting.”