Crypto prices have floundered somewhat since the recent rally, as Bitcoin has made a small retracement from the $25k level, and analysts question whether or not we can safely say that the bear market is now over.
Inflation remains high, and the Federal Reserve has committed itself not to cease rates, or to lower rates, until the situation is once again under control.
Could today’s data lift the mood?
Unfortunately, it seems that the data released today shan’t improve the mood dramatically, as the inflation data was shown to be surprisingly high.
This isn’t a positive thing for the markets since it means that the Federal Reserve is unlikely to slow down their aggressive policy of raising rates.
Stock markets have been tumbling on the news, and the Bitcoin price has fallen once again to the low $23,000 area.
The Federal Reserve will most likely continue hiking rates
There had been some hope that the worst of the inflation was behind us, as higher levels of unemployment began to offset the higher prices faced by consumers.
However, this has not been successfully remedied yet by previous rate hikes, and Chairman Jerome Powell has signalled (along with his counterparts at the ECB and BOJ.
According to Chris Zaccarelli of the Independent Advisor Alliance:
“The Fed has much more work to do [as the data] reinforces the view that inflation is persistent.”
It ought not come as a huge surprise that inflation remains higher than expected, especially when one considers that the Federal Reserve printed 40% of all the USD in existence within a time span of just 12 months.
What does this mean for crypto?
Over the short and medium term, crypto is being treated as a “risk on” asset rather than an inflation hedge, and this means that rising interest rates will likely be bearish for the asset class.
However, there is a rising number of capital allocators who turn to Bitcoin’s scarcity and view it as a store of value and inflation hedge – over the longer term it is likely that this will play out and more people will come to adopt Bitcoin, particularly in countries that are already being hammered by their central banks, such as Lebanon and Argentina.
- Fed Interest Rate Probability Rises on Sticky Inflation and Strong Data
- Watch Out for Inflation Data Next Week as Earnings Take a Back Seat
- From “Transitory” to “Disinflation”: Here’s How Fed’s Inflation Description Changed
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