The past week brought hope and confidence to lots of crypto participants. This is due to the growth seen in most major cryptocurrency tokens as they witness some price increase. However, happy days seem to be cut short suddenly as prices twist in reverse.
The last 24 hours have thrown the crypto market into a confusing state and tension as prices dip. Some crypto experts are afraid that increasing inflation could lead to another period of bear markets. Most of the leading crypto assets are experiencing a downward climb after rising considerably in last week’s space.
Bitcoin price has dropped beneath the $23,000 level again. It’s currently trading around $23,0760 after it had climbed up to $24,500. Ethereum is not doing any better as its price got to $1,570 from $1,764. However, it has shown a slight price rally to be at $1,688 currently. There are also price losses for Ethereum Classic and Cronos.
Trivariate’s founder and CEO, Adam Parker, during an interview with CNBC, pointed out that CPI is contributory to the present situation. Parker stated that CPI is likely to keep its high position.
According to Parker, he’s yet to notice any supportive intent from the Fed. He further observed that the housing market is experiencing a surge in rent by up to 12% annually.
CPI Plays A Vital Role In Crypto Market Trend
The Consumer Price Index (CPI) is a vital indicator that the Fed uses in gauging inflation. But some experts have no confidence in the index due to its lagging nature. To them, it would take quite a long time for CPI is ease up. Usually, CPI must get below 2 for a significant price rally for both crypto and stock markets. However, this could only happen with a massive recession.
Other experts have different opinions concerning the pending events. For Chris Toomey of Morgan Stanley, inflation is yet to peak. According to him, the global GPD is creating more concern. Hence, the current inflation is becoming structural instead of transitory.
The impact of inflation rise could be quite drastic on the prices of cryptocurrencies. The Federal Reserve has been trying to control its influence by using hikes in interest rates and quantitative tightening. In June, cryptocurrency was thrown into a bloodbath as the Fed inflicted a 75 bps raise in rates.
As the July CPI displayed rising inflation, the crypto market showed no significant drop. Some experts explained that the market had previously partaken of bad CPI data followed by an increase in interest rates.
Several players anticipate the positive turning of the CPI value in August with a course reversal from the Fed. Any contrary condition would likely push the crypto market into a bearish trend.
Featured image from FX Empire, Chart from TradingView.com