The Federal Reserve is expected to publish numbers on the consumer price index (CPI) this Thursday, with the crypto market closely watching. Crypto prices could be set for a recovery if the metric shows a drop in inflation.

Analysts on Inflation Watch

Over the past few months, the crypto market has strongly correlated with the traditional economy. And with global economies currently battling rising inflation, crypto prices have tanked significantly.

This week, the United States Federal Reserve is now in focus as it gears towards releasing numbers concerning the Consumer Price Index (CPI). The Fed took a hardline stance on inflation, raising interest rates by 75 basis points multiple times already. While analysts understand that this is simply to curb inflation, the market is starting to lose patience with rising interest rates.

Following yet another 75-basis-point increase last month, CPI numbers released this week will provide the first scorecard for the Fed’s policies. Estimates collected by Bloomberg show that analysts expect year-on-year inflation to hit 7.9%, a 0.3% downtrend from the levels recorded in September.

The Fed already signaled that it would take a less aggressive approach to interest rates in the future. If the inflation numbers come in lower than expected, risky assets like crypto will surely see surges, just as stocks and other markets are expected to rise.

Investors Anticipate Midterm Election Results

Another significant macroeconomic factor to consider is the current US Midterm elections. The polls, which open on Tuesday, will determine the control of Congress for the next two years at the very least. And in several key battleground states, including Georgia and Pennsylvania, Republicans and Democrats are currently neck-and-neck.

Republicans have primarily favored the crypto space from a legislation perspective, and there is a significant chance that the market will get more favorable regulations if they take back Congress. Nothing is confirmed until the votes are counted.

The US Dollar Index (DXY), which measures the greenback’s performance against several other major currencies, currently trades at $110.6, a downtrend from a high of $112.9 reported last week.

Crypto Wobbles On FTX Insolvency Rumors

Finally, the market is also interested in the outcome of the current situation at cryptocurrency exchange giant FTX.

The exchange has been dealing with insolvency rumors of late following speculation that the exchange could be facing dwindling reserves. Rival exchange Binance’s decision to liquidate its FTX token (FTT) holdings has also fuelled rumors that the exchange could face a liquidity crisis.

While Binance CEO, Changpeng Zhao, has defended his company’s FTT liquidation, FTX CEO, Sam Bankman-Fried, has also been looking to reassure markets that all is well at the company.

Undoubtedly, an insolvency issue at FTX will be a huge problem for crypto. Several top crypto firms have gone bankrupt in 2022, but none even comes close to the size and reach of FTX.

Considering that the altcoin exchange itself stepped up to bail out several distressed companies this year, its insolvency could be one step too far, especially for a nascent market that is still trying to shake off a bearish rut.

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