Inflation May Be In A Lull, What Does That Mean For Bitcoin?

In a recent tweet Ben Lilly, co-founder of Jarvis Labs, the on-chain analytics and token design firm, gave his analysis of the past, present, and possible future of inflation and how this can affect Bitcoin and the crypto market. 

According to Lily, inflation has cooled in recent months based on the latest Consumer Price Index (CPI) reports. The numbers might suggest that the economy seems to be in the process of a slow recovery.

However, Lilly states that he is not convinced that the problem has been solved and that inflation might have new phases of spikes that can wreak havoc on global markets.

How Can The Future Of Inflation Affect Bitcoin And The Crypto Market?

In the chart below, Ben Lilly suggests that in the late ’60s and early ’70s, the CPI was recovering after years of recession, with lulls or calming periods before new spikes, but as seen in the following years on the chart, the CPI spiked years later, putting the global market into a new phase of economic depression. 

Lily suggests that we may be in the first lull, which means that inflation will persist. However, he admits it will be more significant when the second wave comes.

In addition, an analyst at Jarvis Labs, in an article published on January 24th, titled “Don’t get caught by the inflation tides,” suggests that we may be entering a “Triple Wave” period of inflation, similar to a period that occurred 50 years ago. 

TD, the analyst’s pseudonym, states that what the markets are experiencing now is a temporary pause between the inflation tide theory explained above. While the market has been in a bullish trend since the beginning of 2023, and CPI shows that inflation is moderating rapidly, there is a potential for a spike in inflation which can negatively impact the price of Bitcoin. 

The Rebirth Of The Bear Market In a Second Tied 

Theoretically, we are in a first lull. Inflation can reverse investor sentiment and prices, with two possible tides coming for the global economy, not only for the U.S. but for all traditional markets and cryptocurrencies. 

Bitcoin has been on cloud 9 in 2023, and so have the majority of cryptocurrencies aiming for new annual highs. Still, with this scenario being a possibility, it can reverse into a new phase of a bear market and unchained inflation. Without the certainties of a wholly healed economy, this should be noted by investors and the crypto industry.

Bitcoin is currently trading at $22,880, with a negative performance of -1.6% in the last 24 hours, still having a profitable week with a growth of 8.3% in the last seven days, climbing to new levels and testing previous support levels that have now turned into resistance walls.

With bearish divergences for Bitcoin and Ethereum in the daily time frame, it could take the market to a significant correction. With throbbing inflation on the horizon, the market could test the 2022 lows and even record new lows. The analyst concluded:

(…) Inflation seems to be tamed – for now. From the markets’ reaction, investors seem to believe we have reached peak inflation, and the Federal Reserve (FED) will resort back to rate cuts and quantitative easing to resuscitate a faltering economy. But not so fast, there are inflationary pressures still hiding underneath the waves.