Crypto Plummets As CPI Worsens, Any Chance For Reversal?
September 15 2022 - 10:25PM
NEWSBTC
Crypto prices have maintained a strong correlation with most
macroeconomic factors. It’s no longer debatable that inflation
affects the trend in the crypto market. Most past digital asset
declines took root from the swing in the general global economy.
The intensity of the crypto winter through the year’s first half
had accumulated strength from potential inflation. However, due to
the suspicions of inflation rise in the economy, crypto prices have
shown signs of decline. The recent data on CPI have even pushed the
market to another red region. Related Reading: Bitcoin Must Hold
This Level Or Risk Falling To $10,000 The Consumer Price Index
(CPI) is an economic indicator that measures inflation through the
movement of the cost of goods and services. The percentage increase
in the CPI over a given period provides the economy’s inflation
rate for the given time. However, the report for July brought a
slight relief as CPI indicated almost zero impact on inflation.
With the positive significance of July’s information on the crypto
industry, lots of hope got high. Many participants expect a more
favorable result for August, but their expectations have been
squashed. CPI Data Gets Below Crypto Community Expectations
Finally, August’s released CPI report contradicts the crypto
space’s expectations. The result revealed a 0.1% MoM change and an
8.3% YoY change, indicating a wrong value for the industry. The
crypto market had estimated the CPI to be -0.1% MoM and 8.1% YoY.
Also, against the anticipated core CPI of 6.1%, the real value is a
6.3% YoY rise. With the outcome of the CPI data, prices in the
crypto market have started dropping. Bitcoin and Ethereum are
taking the news badly as BTC and ETH have plummeted. The action of
the crypto assets over the CPI data is not surprising. This is due
to the impact of inflation on cryptocurrency volatility. While
making its monetary policy, the Federal Reserve always considers
the CPI. Currently, the Fed is using a hawkish approach as its
control measure over inflation in the US. But, per Fed chair Jerome
Powell, the Fed’s stance in controlling inflation will bring pain
to businesses and homes alike. Potential Hike In Interest Rates
Could Hit The Market Seeing the CPI data getting worse means more
aggressive curbing actions from the Fed. A better report would have
eased the tightening measures of the Fed. According to the CME Fed
Watch tool, the Fed may impose about a 75bps rise in the interest
rates. Such a hike in rates is a sad story for the prices of crypto
assets. While hopes are dropping for a potential salvage in the
crypto market, some hands are pointing to the Ethereum upgrade. The
Merge is promising in the industry and could facilitate a price
rally in the future. Related Reading: Bitcoin ETF Inflows Returns
After Abysmal Phase But lots of traders have no confidence in the
success of the upgrade. Hence, the crypto market could not have a
handy savior. Featured image from CNBC, chart from TradingView.com
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