By Marcus Sotiriou, Market Analyst at a publicly listed digital asset broker GlobalBlock (TSXV:BLOCKS)
Bitcoin has fallen to $28,000 and is currently at a key support level. From a technical analysis perspective, this is a watershed moment for Bitcoin – if $28,000 fails to hold on the daily time frame, it will signal a deviation back into the range it just broke (10 month consolidation). $28,000 was also the Summer 2021 low, further exerting significant influence.
The recent drop in Bitcoin price was partly due to the high UK inflation data earlier in the week. UK headline CPI YoY came in at 10%, above forecast 9.8%, and core CPI was above 6% YoY. Retail price inflation also displaces consensus forecasts. This is the 10th month in a row that the UK CPI has been above 10%.
However, the UK’s real yield curve remains very low, meaning that current monetary policy may not be enough to encourage tightening. We are already seeing stagnant demand as UK real GDP remains below Q4 2019, and unemployment rises to 3.8%.
The combination of persistently high inflation, stagnant demand and higher unemployment means the UK economy could soon enter stagflation, where we experience both high inflation and slow growth.
However, institutional investment in the blockchain business is growing, particularly in Africa. According to CVVC’s latest African blockchain funding report, $474 million was invested into African blockchain businesses, such as digital asset brokerages, by 2022 – a 429% increase over the previous year. More than 50% of the funds were allocated to categories such as digital asset brokers, custodies and exchanges, which raised over $250 million. Total funding for companies such as digital asset brokers in Africa amounts to 29 deals – four more than those completed in 2021.