Inflation is difficult to peak, US CPI data in May hit a 41-year high, Bitcoin fell below $29,500

Data released by the U.S. Bureau of Labor Statistics on Friday showed that U.S. inflation accelerated further in May, with the Consumer Price Index (CPI) rising 8.6% year-on-year, the fastest increase since December 1981 and a 41-year high.

As central banks in Western countries have begun to tighten monetary policy in the past few months, almost all financial assets have been hit hard. After the data was released, U.S. stocks opened sharply lower and government bond yields rose. In the crypto market, Bitpush terminal data showed that Bitcoin fell from $30,000 to $29,500, a drop of nearly 65% ​​compared with the all-time high set in November last year.

The Consumer Price Index (CPI), a broad measure of the prices of goods and services, reported by the Bureau of Labor Statistics, showed that prices rose across the board in the U.S., with housing, gasoline and food costs being the biggest contributors. The housing index surged 0.6% in May, the largest monthly gain since March 2004. The energy and gasoline indexes rose 3.9% and 4.1%, respectively, after temporarily falling in April. Food costs climbed again in May, up 1.2%, and were up 10.1% year-over-year.

Economists in a Wall Street Journal survey had forecast U.S. consumer price inflation for May at 8.3%, an overestimation of 30 basis points, with Friday’s data dampening hopes that inflation may have peaked and raising concerns that the U.S. economy is close to a recession.

Julian Brigden, president of global macroeconomic research firm MI2 Partners, told CNBC: "Obviously, there's nothing in this report that's good, there's nothing that's going to give the Fed any cheers... I find it hard to see how the Fed responds."

Inflation remains strong despite the Federal Reserve's efforts to raise key interest rates and slowly begin to shrink its balance sheet, which could portend a bleak outlook for risky assets such as stocks and cryptocurrencies.

According to Bloomberg, the market now expects the Fed to raise interest rates by 50 basis points in June, July, and September to reduce inflation to its target level of 2%. This will make borrowing more expensive, reduce the supply of money in circulation, reduce consumer demand for goods and services, and ultimately affect economic performance.

While it’s unclear whether inflation fears will trigger further market declines, some technical analysts believe Bitcoin could suffer more pain.

Alex Kuptsikevich, senior market analyst at FX Pro, believes that bulls are unable to regain control of the market due to the prevailing negative sentiment and uncertainty. Kuptsikevich added that a rebound pattern has not yet formed and prices may fall further: "We should be prepared for the cryptocurrency market to retest the support of last week's lows in the short term. We believe that the area around $20,000 is the ultimate target of a potential sell-off, which corresponds to Bitcoin's long-term support line".

Another crypto veteran said that if Bitcoin fails to hold at $29,300, it will continue to face "pain." The founder and CEO of crypto consulting firm Eight commented on Twitter: "The key area is about $29,300. If we fall below, it will be painful."

Anonymous commentator WhalePanda warned panicked investors not to reconsider their BTC allocations due to the macro environment, writing: “Dumping your Bitcoin because inflation is higher than expected is one of the dumbest things you can do.”