- For the cryptocurrency market, poor CPI data is bad news.
- Bitcoin is now trading at $20,825, down from above $22,000.
Recently, the consumer price index was revealed. The CPI shows an annual increase of 8.3% and a monthly change of 0.1%. The cryptocurrency market expected much larger volumes. The CPI was expected to be 8.1% YoY and -0.1% MoM. For the cryptocurrency market, poor CPI data is bad news.
Bitcoin and Ethereum Its value decreased as a result of the CPI report. Within a few minutes, both Bitcoin and Ethereum lost about 6% of their value. Bitcoin is now trading at $20,649, down from above $22,000. Core CPI data is also less than expected. There was an unexpectedly large rise in core CPI of 6.3% year over year, instead of the 6.1% that had been expected.
Tough times ahead
Inflation is often tracked by the Consumer Price Index. The Federal Reserve considers this information as it formulates its monetary policy. Efforts to curb inflation prompted a more hawkish tone of Federal Reserve. As the Fed works to bring down inflation, Fed Chairman Jerome Powell warned that individuals and businesses will feel the pinch.
To some extent, the Fed’s stance may have been softened by more encouraging CPI numbers. However, the Fed will almost certainly maintain its assertive course in light of the worse-than-expected statistics. According to the CME Fed Watch, the Fed is likely to raise interest rates by 75 basis points. The cryptocurrency market will not benefit from the higher interest rates generated by the CPI. The crypto market collapsed in June when the Federal Reserve raised interest rates more than expected.
Moreover, markets are not expected to take a breather after September. Treasury Secretary Janet Yellen expects a sharp rise in winter inflation due to gas scarcity in Europe.
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