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- 1 Following the CPI, Bitcoin fluctuates back under $26K as investors await the Fed’s decision on a rate hike.
- 2 The Fed’s protracted campaign of aggressive monetary policy appears to be over.
- 2 Soon, the Central Bank will have to shift its emphasis from reducing inflation to averting a recession.
When the May Consumer Price Index (CPI) was announced on Tuesday, Bitcoin at least temporarily profited from the sound of declining inflation.
Bitcoin enjoyed hearing about declining inflation
The most expensive cryptocurrency, measured by market capitalization, was last trading at $25,846, down 0.2% from the day before and down from its previous high of nearly $26,000. One hour after the US Bureau of Labour Statistics announced a 4% increase in the CPI, the assumption was made. It did better than both the anticipated 4.1% and April’s 4.9%.
BTC has been flat below $26,000 for the last four days. Investors were anticipating both the Federal Reserve’s interest rate announcement on Wednesday and the most recent inflation reading. Putting aside their concerns about the SEC’s charges against Binance and Coinbase, two bitcoin exchanges.
The Fed’s year-long campaign of aggressive monetary policy now seems to be winding down. When the CPI soared to 8.6% a year ago, the Federal Reserve raised the Federal Funds rate by 75 basis points (bps). Risky assets rose concurrently as a result of this.
Tim Frost, CEO of digital wealth platform Yield App, stated in an email that while today is great news for the U.S. economy and Bitcoin, “Today is horrible news for the U.S. Any instability brought on by tomorrow’s interest rate decision or the impending recession in the United States is likely to be advantageous for crypto assets. Even though certain cryptocurrencies had drops of up to 30% in the preceding week, others will rise.
Frost asserted that the rumour that the SEC would sue two of the most well-known companies in the Bitcoin market has been put to rest. The cases brought “certainty” to the markets as a result of this. As a result of the proceedings, the courts and authorities may be forced to decide whether to classify cryptocurrencies as securities, commodities, or something else entirely.
The tech-heavy Nasdaq Composite and S&P 500 both increased by 0.8% and 0.6% as a result of the CPI data. While the yield on US 10-year Treasury bonds increased to a very robust 3.8%, Brent crude oil, a measure of the energy markets, dropped down marginally to trade at $73 per barrel, far below its sky-high heights above $112 a year ago.
Oliver Rust, head of product at independent inflation data aggregator Truflation, observed the fall in energy costs and overall inflation rates in an email. Additionally, he brought up the tenuous signs of a cooling in the heated labour market. Changes in important macroeconomic variables that were not wanted frequently upset crypto assets. But cautiously, Rust continued, “The economy appears to be trending towards a quarter of negative growth at the very least.”
According to technical standards, a recession is defined as two consecutive quarters of negative growth, the author said. Therefore, if GDP growth continues to decline in Q2, the United States will find itself on unstable ground. The Central Bank will be obliged to shift its emphasis from reducing inflation to averting a recession when the 2024 US presidential election campaign gets underway.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
