- For the cryptocurrency market, poor CPI data is bad news.
- Bitcoin is now trading at $20,825, down from above $22k.
Recently, the CPI was revealed. The Consumer Price Index shows a YoY rise of 8.3% and an MoM change of 0.1%. The cryptocurrency market expected much higher volumes. It was anticipated that the CPI will be 8.1% YoY and -0.1% MoM. For the cryptocurrency market, poor CPI data is bad news.
Bitcoin and Ethereum have dropped in value as a consequence of the CPI report. In only a few minutes, both Bitcoin and Ethereum lost about 6% of their value. Bitcoin is now trading at $20,649, down from above $22k. Core CPI data are also lower than predicted. There was an unexpectedly large rise in the core CPI of 6.3% YoY, rather than the 6.1% that was predicted.
Tough Times Ahead
Inflation is often tracked through the Consumer Price Index. This information is considered by the Federal Reserve as it formulates its monetary policy. Efforts to reduce inflation have prompted a more hawkish tone from the Federal Reserve. As the Fed works to reduce inflation, Fed Chair Jerome Powell has warned that people and companies would feel the pinch.
To some extent, the Fed’s attitude may have been mitigated by more encouraging CPI figures. Nonetheless, the Fed will almost definitely maintain its aggressive course in light of the worse-than-expected statistics. According to the CME Fed Watch tool, the Fed is likely to increase interest rates by 75 basis points. The cryptocurrency market will not benefit from higher interest rates caused by CPI. The crypto market crashed in June when the Federal Reserve raised interest rates more than expected.
Moreover, the markets are not expected to get a break beyond September. Secretary of the Treasury Janet Yellen predicts a spike in winter inflation owing to Europe’s gas scarcity.
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